How do you run a not-for-profit planning business?

3 June 2020

What happens when a mid-sized industry superannuation fund establishes its own financial planning company and is satisfied with running it on a cost-recovery model?

That is what NGS Super has done with recent evidence produced to a Parliamentary Committee revealing that it now employs 17 salaried advisers each servicing about 6,930 members.

NGS Super revealed it owned shares in NGS Financial Planning which it told the House of Representatives Standing Committee on Economics was established for the purpose of providing financial education and advice services to members of the Fund, but did not provide services to other funds or entities.

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The bottom line is that NGS Super estimated that the cost of education, general advice and intra-fund advice per member in 2019 was $18.

It said all fees of NGS Financial Planning Pty Ltd, whether direct to member or to the fund, were charged on a cost-recovery basis.

“NGS Financial Planning does not earn a profit,” it said.

The fund’s answers to the Parliamentary committee revealed that the cost of planning services kicked off at $1,015 million in 2015 and had risen to $1,796 million last year.

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An interesting set of numbers. At 17 advisers with 6,930 members each, costing $18 per member, that suggests a total cost of $2,120,058. Which is higher than $1.7 million quoted in the article. If you then divide $2,120,058 by 17 (the number of advisers) you get $124,740. So each adviser 'costs' $124,740 in salary, super, CPD, ASIC fees, TPB fees etc etc? I call BS. Maybe if each adviser was getting paid no more than $80k in salary, but find me an adviser who does that?

1 adviser with 6,930 clients? Being paid $124,740. I'm being told you can't advise more than 150 clients per year. So NGS have 150 clients paying $124,740 or $831.60 each for retain balanced fund recommendations.
I've got a couple of extra study units to finish (but i have passed the FASEA exam) but maybe i'm not very bright because i always though $831.60 was more than $18.
Or maybe NGS have 6,780 people paying for advice they don't get.
Nah. It's probably $18 = $831.60

It is not providing personal adice. The acticle states "education, general advice and intra fund advice" therefore no SOA's, and for much of this work no formal educaiton required. It's more like a call centre. Somebody should ask how many SOAs' are they doing.

Do you not need to be a licensed adviser to provide intra-fund advice?

For the Industry Funds (ISA);
For general advice no. Very few in the call centres are qualified and almost zero are licensed. It might be the Wild West as to what they are telling people. Who knows?
- so not a level playing field at all.
For an SOA, yes,.The few Planners they have are licensed - that is, on the FAR.

My understanding is intrafund advice does not need an licenced adviser, no SOA and less compliance.

Intra Fund advice is personal advice not general advice. It needs an SOA and qualified advisers even though scope is limited to the Fund.

Dear Dianna, Can you please expand your thoughts. My understanding comes from the professional planner interview with Unisuper in March this year. My understanding is intra fund advice is never personal advice. "‘Intra-fund’ refers to the type of advice a superannuation trustee can provide to members where the cost of the advice is borne by all members, but it excludes personal advice and a series of other advice scenarios as outlined in the SIS act."

Intra-fund advice can be personal (meaning they take the persons situation into account), it just can't be about things other than beneficial interests in the fund. Therefore, it can be about which options to pick in the fund, how much insurance to have in the fund, contribution levels etc. But it can't be about rolling over from another fund or insurance outside the fund and it can't be complex. The confusing thing is that the same people giving general advice could be giving personal advice too and who decides when it changes from being allowed under intra-fund rules (and thus not charging the member but costs covered by the fund) and when it moves into complex advice that needs to be charged for?

I wouldn't take an article in a magazine as proof of what's allowed, the slightest miss wording can take on a completely different meaning.

Have a look at this from ASIC

Or if you can be bothered, have a look at Sect 99F of the SIS Act

That's pretty much right.
Moreover, Carlen, in her response, failed to add the word "licensed" to her comment about qualified persons giving intra fund advice.

thanks very much!

Super fund employees only need to be licensed if they provide personal advice. Not if they are providing general advice. So most super funds use unlicensed employees to deliver "general advice".

However when the super fund employee has a large amount of the client's personal and financial information on screen in front of them, and the client tells them about their personal requirements in the call, the client has good reason to assume the advice they receive has taken their personal circumstances into account. Regardless of any legalistic disclaimer. Therefore it is personal advice. Therefore it is illegal if given by an unlicensed employee and without an SoA.

But given the primary offenders are union funds, don't expect ASIC to enforce this law anytime soon. Union funds have unofficial regulatory immunity, and ASIC is far too busy persecuting licensed advisers.

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