Do industry funds now have an advice advantage?

On the back of the Association of Financial Advisers’ (AFA’s) strong rebuttal of Industry Super Australia (ISA) calls for a rapid end to all grandfathered commissions, some advisers are warning that salaried industry fund advisers now have a significant advantage.

The advisers have told Money Management that the industry funds salaried advisers are at an advantage because they can provide intrafund advice without providing Fee Disclosure Statements or having to provide opt-in notices because they are not actually receiving fees but are being paid out of member funds.

At least some of the critics have suggested that the emerging regime makes the operations of many industry funds employing salaried advisers similar to the old “tied agency” models utilised by AMP Limited and National Mutual decades ago.

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The issues around the status of industry fund financial advisers have been raised in the context of planner anger at suggestions by Industry Super Australia that Government proposals to rebate grandfathered commissions to clients would only incentivise advisers to recommend those clients stay in commission-based products.

The ISA claimed that “consumers will once again be left vulnerable to raids on their super accounts by financial advisers”.

Responding to the ISA claims, the AFA issued a point by point rebuttal with chief executive, Phil Kewin condemning the industry funds claim as totally false and insisting that there was absolutely no mechanism for such a situation to arise.

“We cannot see how the draft legislation and regulations that ban grandfathered commissions in any way allow the continued payment of conflicted remuneration beyond the date of banning,” the AFA rebuttal said.

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"Industry funds salaried advisers are at an advantage because they can provide intrafund advice without providing Fee Disclosure Statements or having to provide opt-in notices because they are not actually receiving fees but are being paid out of member funds".

This smacks of EXACTLY the same as tied agent model which died decades ago. Under this model the duty of care is to the employer and NOT the client.

"Salaries paid from member funds" is fine but a commission is devil's own evil.

The stench of hypocrisy and un-level playing field is beyond belief.

It's a simple ISA aka Union aka Labor Party stichup of the best(worst) kind.

I wonder if this rubbish the industry funds are peddling over fund manager's rebating trails is because they are becoming concerned that the fee level of retail funds is now going to be much closer to their own and ruin their "compare the pair" marketing campaign.

Once upon a time, in a galaxy far, far away, there existed a financial world in which there were "agents" and "brokers".

Agents represented institutions, and brokers represented clients.

Both provided good advice to their respective clients - even though from time to time some Jedi adviser would turn to the dark side.

Clients understood that their adviser was either biased towards the company they represented or worked from a range of options across the open market.

Institutions liked this, as it "tied up" their marketing forces, and kept dollars circulating in huge, profitable black holes.

Clients began flocking to brokers, who led a rebellion against the Institutions. The tactical response of the Institutions was to build a series of Battle Stars to protect their outer frontiers from attack. Eventually, these frontier outposts led to discussions between agents, who convinced their institutions to open their borders just a little, and share some of their booty. Agents could now offer more than one institution's wares, and they prospered, along with their institution.

The war melted into a frontier skirmish, with both sides confused and dazed as to where the borders were to be drawn.

There is an awful lot of angst in today's border skirmishes. They are really just demarkation disputes. The legislative system does little to deal with today's technology, and advisers are almost as confused as clients.

History has a great deal to teach us.

The Royal Commission absolutely failed to address the primary issue underlying financial services in Australia today - and that is BIAS. There's no real problem to bias, so long as it is obvious. The retention of vertical integration allowed, and even condoned the underlying problems as being "ok", simply because the big institutions have enough money to pay for their indescretions. Eventually. So we retain a system that benefits some and penalises others, simply because of which battle insignia they wear.

The provision of financial advice is a complex issue. More subtlety and finesse would be a good response, rather than these sector-smashing wars of attrition.

Industry super funds have done a fantastic job for the average member. They have reduced costs across the board, albeit by nowhere near as much as they should have been able to achieve had they stuck to their core principles. They deserve a say in any SUPERANNUATION discussion.

But they do not represent financial services generally. That is a much wider field. And in that field, discussion should embrace a wider set of market players, and consider more than just one business model.

That is the discussion Australia needs ot have. There is more to financial services than just superannuation. The super dollars have become so big, and created so many big vested interests that super funds and their army of administrators/managers are being given a bigger seat at the financial services table than they deserve.

That is the discussion that Australia needs to have. Super is just a tax regiime. It's bigger than all the others but financial planning is about more than super. More people need to remember that when discussing money and ideas for rules and legislation.

Loooove the Star Wars analogy. :) Just stick a cloak on Commissioner Hayne and he'd be a shoe in for Emperor Palpatine!!

Very well said.

Yes - and a two regulators.

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