Deducting advice fees from member accounts gets thumbs-up

13 February 2020

The Government should consider reviewing the delivery of financial advice within superannuation as well as single-issue advice outside of superannuation, in circumstances where there is a lack of good data about how well the system is working and the quality of financial advice varies between funds.

Actuarial research house, Rice Warner has used its submission to the Government’s Retirement Income Review to point to the lack of good data and to cite the “obscurity of current legislation” which makes it difficult to deliver advice efficiently.

However, on the question of how that advice is paid for, and contrary to the recommendations of the Royal Commission, Rice Warner is arguing that it is reasonable to deduct adviser fees from member accounts, provided the advice pertain to the member’s superannuation.

Related News:

“Many funds allow members to authorise them to deduct fees for services from a financial planner relating to superannuation. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry recommended prohibiting such fees being made from MySuper accounts,” it said.

“The logic appears to be that a member in a default structure does not need advice. However, there are many members in MySuper products who have chosen to join them either directly or based on financial advice. Even those in their employer’s default MySuper might still want advice on their total financial affairs including monitoring of their superannuation,” the submission said.

The Rice Warner submission also recommended simplifying the processes around the delivery of advice in retirement with the goal of reducing costs and increasing member usage.

“As members approach retirement, it becomes more difficult for superannuation funds to assist members. As there is no default retirement product, each member needs to be placed in an investment strategy which is ideally determined only after provision of a comprehensive financial plan. The cost of delivering such a plan (usually $2,500 to $5,000) is more than most members will pay,” it said.

“Within the retirement phase, most regular advice is about budgeting and appropriate levels of withdrawals. This retirement counselling is valuable, and all funds should provide this as part of their account-based pension product.

“Like the work of money or finance coaches outside superannuation, this activity does not fall under the financial advice regime. Consequently, it should be possible to deliver the service cost-efficiently using technology and retirement counsellors within call centres.

“Funds could then offer event-based advice to their account-based pensioners periodically based on the need of each retiree. Such events would include the death or divorce of a partner, the need for a late life annuity or home equity release, and the need for Aged Care services. This advice could be delivered for a flat fee by a financial adviser (not necessarily related to the fund).”

Recommended for you




Actually, I hope the Coalition allow this particular bill to go through. There are still some industry funds that deny charging of advice now, so this particular draft bill will encourage even more members to switch out of default funds into lower cost choice funds. This industry is cooked in the head, with no idea how low income earners seek advice. It's as if the entire industry (Fund Management execs & Parliamentarians) think most fund members operate under the wholesale investor regime (ie no red tape & no paperwork), and none of them would recognise a low income fund member if they fell over one. Just a disgrace.

If the Government was serious about reviewing the retirement income system, why aren't they speaking to financial planners? Why would you ignore the people who actually work with consumers every day, helping them to understand their retirement options and work through all of their concerns and challenges. There is no greater source of information on the subject. Unfortunately, like ASIC and Kenneth Hayne, they are ignoring the most obvious source of valuable insights. I find this completely bizarre.

Because the government is not actually serious about reviewing the retirement income system. Nor are they serious about making it easier for consumers to access affordable, professional advice. Nor are they serious about minimising consumer harm from dodgy financial products.

The government's sole focus in financial services is persecuting advisers in order to curry favour with the dishonest media. They do not care how much damage is done to the majority of innocent advisers and consumers as a result. Media honesty and government responsibility have all but disappeared in the last 10 years or so, and society is paying an increasingly heavy price.

that's true, just ask any consumer who has had no experience with a financial planner what they think of a financial planner/adviser - they will say the following:

a. shark
b. immoral
c. unethical
d. cannot be trusted
e. whenever something goes wrong there is a financial planner involved

this unflattering portrait of us which is hurtful is from the media, it could not be farther from the truth. but it is a political hot potato, who wants to stick their neck out in support of financial planners amongst the issues unearthed by the royal commission

so for the foreseeable future we will have to suffer in silence like many other groups of people before us who have been targeted unfairly because of a poor lack of understanding and a royal commission hell-bent on following a narrative

at least after the grad dip fp they will no longer be able to say you can qualify as a financial planner in 4 days

2 significant things we do for clients are save tax effectively and structure assets to help maximise aged care benefits.
If you are the government what does this look like to you? Less income (tax revenue) and more expense (aged care payments)
With less advisers, and less people receiving advice the government collects more revenue and pays less expense.
So it is beneficial for the government to make advice harder to access. Standard 3???

Financial Coaches, councillors, in house advisers.... conflicted advice and product sellers? Someone remind me why were commission paid to an adviser banned when all the client will now have is an employed adviser - paid for with fees from the product provider?
Independently owned advisers out, directly employed and controlled advisers in.

Add new comment