Industry fund scaled advice still rankles

Some financial planners are continuing to scrutinise the financial services guides (FSGs) being issued by industry funds and questioning why industry funds advisers appear to be treated differently.

The financial planners have pointed to the latest Financial Services Guide issued by UniSuper and claimed that it allows advisers employed by the fund to charge $205 an hour for advice provided over the phone while, by way of contrast, other advisers must provide all advice in writing and provide a Statement of Advice (SOA).

UniSuper has attracted the attention of advisers after announcing an upgrading of its advice business last month.

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The planners appear to be referring to a part of the UniSuper FSG referring to “selection advice – personal” which states that a rate of up to $205 per hour (including GST).

It states that: “Scaled personal advice services on a few issues, are typically provided by our Financial Advisers at a cost ranging from $410 to $990 (including GST) depending on the scope of advice, whether we meet over the phone or face to face, and whether you implement yourself or seek our assistance with implementation.

“Any fee will be quoted and agreed before the scaled advice or services are provided. Where you require more comprehensive advice we will refer you to one of our Private Client Advisers”.

However, the UniSuper FSG then refers to “comprehensive advice” and states the typical fee for receiving comprehensive advice is between $2,500 and $6,000 and that a “higher fee might apply depending on the complexity of your situation and high value investments. Any fee will be quoted and agreed before advice or services are provided”.

UniSuper chief of financial advice, Jack McCartney said the suggestion that the fund did not provide written pesonal advice to clients was incorrect and that its advisers always provided a Statement of Advice when delivering personal advice.

"Scaled personal advice is provided by UniSuper under our 'Select Advice' service. We offer members the flexibility to choose between phone-based, video conference or face to face appointments (at our offices or on university campuses)," he said. "This makes personal advice readily accessible by catering to clients’ preferences. After the initial appointment is conducted, the adviser will document the recommended strategies in a Statement of Advice, and present this to the client in a subsequent presentation appointment. Last year we wrote and presented over 1,600 SOAs at an average advice fee of $520 per client."

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Union funds are just taking the piss now. ASIC has continually shown no interest in pulling them up on anything so why would they stop breaching the regulations. If nothing else it proves why intrafund advice should be banned.

The reason this can happen is the government is gutless.
The RC was theatre and the government has not stomach for a fight with union proxies - the industry funds.
Superannuation has been abandoned to them.
No way should there be an increase in the SG.

So what's wrong with this? Firstly, 'the provision of 'inter-fund advice' was repealed by ASIC years ago. All advice, irrespective of who gives the advice, is either 'general' or 'personal'. If it is personal advice an SoA must be given [RG175.156] and the 'best interest' obligations apply. There is no prohibition from giving personal advice over the phone advice can be given over the phone [RG175.158] as long as an SoA is provided by the providing entity before the providing entity implements the advice - unless the advice is time-critical [RG175.163 - 164]. All UniSuper staff who provide personal advice must meet the same education standards/requirements as any other financial adviser. 'Personal scaled advice' (refered to as 'Select Advice - Personal' by Unisuper] is also permitted , in fact the majority of advice given by financial advisers is scaled in some way, eg, limited to Super or insurance.

UniSuper is offering 3 types of advice (1) General advice (2) Personal scaled advice (3) Comprehensive advice. Don't most adviser offer (2) & (3) and charge accordingly?

Exactly right Billy!

How are advisers paid for General Advice?

Give the client an invoice!

Billy, that is what will happen with self employed or privately run Financial Planning practices, but at Industry Super my salary and office expenses (and my marketing) is all paid for by charging a fee to every single member - all I would have to do for my employee (Industry Super Fund) is get more FUM into the fund - and no BID applied. See the difference?

While retail & industry fund advisers can equally offer both scaled & personal advice, the difference is that Industry Fund advisers can be paid a decent salary every year out of the member administration fees, while the Industry fund is advertising in the media "we don't charge for advice", which is highly deceptive.

Secondly, as industry fund advisers are primarily paid salaries & performance bonuses out of the member admin fees under the IntraFund advice provisions, they conveniently escape the Fee Disclosure Regime & the Opt-In regime that Labor cleverly lumbered on the non-Industry Fund advisers before they left office.

Third, their UniSuper FSG makes it clear that their hotline staff can receive bonuses for referrals to the paid advisers. Gosh that looks remarkably like the bank tellers who used to receive financial incentives for flogging insurance at bank branches. This is a total joke & a lot of advisers have had enough of this racket. The Union Funds have now become the new tied agency AMP & Bank sales machine.

Well said.

Are these inhouse advisers subject to the same "ethics" and "higher education" requirements that external advisers are required?
One set of rules for one, and then another for another.

Off course they are. Aren’t you aware of the new Code Of Practice for all advisers?

I don't believe advisers giving general advice only have to RG146 1-3 i believe. and they are not required to follow the new rules as they are not giving General"advice" so no advice is given

The lack of industry understanding is amazing with some of these comments. know your product...

You are correct Barry. It is surprising how some advisers start offering their opinion but really have no idea. They use these forums, such as this, to push their own barrow and generally the comments have nothing to with the article at hand. All advisers should be aware of the initial education / CPD in respect of giving general and personal advice and the new Code of Ethics. If they cannot get this correct what hope has the public got in looking for advice in their best interest.

Billy, don't be silly, you don't need an Adviser to give general advice and sell product - and Industry super does this well. I'm just surprised retail tried to give advice - how stupid when a floor or two of call center staff giving general advice will do.

Wondering, you are correct - General Advice can be given in forms other than by a person. However, if a person gives general advice, eg, an industry fund call centre, that person must meet the educational requirements. The following is an extract from RG146:

RG 146.17 All natural persons who provide financial product advice to retail clients must meet the training standards, unless they fall within one of the exemptions in RG 146.18–RG 146.29. This means that, subject to limited exemptions, the training standards must be met by:
(a) natural person licensees;
(b) natural person representatives of licensees; and
(c) natural persons who are authorised by a corporate authorised representative of a licensee,
who provide to retail clients:
(d) personal advice (as defined in s766B(3) of the Corporations Act 2001 (Corporations Act)), and/or
(e) general advice (as defined in s766B(4) of the Corporations Act).

Is an assumption being made that Unisuper's advisers providing scaled personal advice arent issuing SOAs? As long as they are, what's the concern? Is it that they might be providing such a service for a cost other advisers charge thousands for?

I would think the concern are these: -
1) the Adviser is on a salary paid for by the Trustee directly (sounds like a commission?) and so is the office and all support staff - nice.
2) The Advice can be I agree charged to the client a price point simply much less than a non employed or self employed Adviser. The Trustee can cross subsidise their salaried Adviser teams no end with fees from the pool of members accounts.
3) When speaking to a salaried Planner running a team of planner at a well known Industry Super, it was very clear that the only Super fund considered for recommendation was that of their employer (Boss) and they did not seem to believe their advice was conflicted.
Perhaps the way forward is for retail to do the same?

I wonder how Commissioner Hayne would have responded if it was known that a fund with +$20m in Advice business expenses only collected ~$8m in revenue. Such a beach of s99F of the SIS Act could not be ignored.

Salaries of former CBA Executives ( and flashy offices don't come cheap (

Are you talking about the $1.65m spent on the 12 directors/board in 2018? If so, that seems more than fair to me, especially looking a the experience and what they bring. I reckon a lot of banks/financial services/trustee companies were wishing they had a similar board for the spend.

$1.65m on 12 directors/board is extremely good value for the calibre of individuals - union backed or otherwise.

Generating enough revenue from members SoA fees to cover the adviser salaries, support staff, middle management, back-office, rent etc. let alone the $482,278 executive manager salary just doesn't stack up - unless you rely on a self-engineered methodology to place a monetary value on 'retention of assets for advised members' that surprisingly equals the cost of the advice business revenue deficit.

Mandatory disclosure of advice operations income and expenses within the RSE's financial statements is the only way to ensure no cross-subsidisation from non-advised member fees (as per the requirement of section 99F of the SIS Act).

If RSE's are compliant with section 99F, they would be delighted to disclose that they are not structured like the evil vertically integrated wealth managers!

Remember UniSelf, quite a few UniSuper members currently going into retirement are defined benefit members, hence they will be staying with the well-performing UniSuper and getting advice accordingly re there DB options.
I can't see the issue with the numbers you raised, they were very hypothetical and irrational not separating the operational aspect of the fund against the extremely fast growing advice division. All round good value for members of UniSuper.

Simple. Show the financials for the standalone advice business and the hypothetical's cease.

As a profit to member fund, how much better would UniSuper members returns be if they are not not subsidising the advice business?

Enough said!

I haven't heard any UniSuper members complaining, they probably like the high-level on campus support.
Enough said!

Yes, it is hard to hear the voices of the members paying your salary over all the backslapping of obedient disciples hoping to climb the greasy pole.

BTW: nice work sending a "survey" to members that have lodged Third Party Adviser authorities asking what UniSuper can do to regain their business.

I didn't send a survey to anyone. I don't work at UniSuper. I'm not a financial planner (most of them seem a little whingy these days).

most likely still think they can't move super funds either way - most of these guys didn't have super choice before

Still don't get it do you.....? Your argument is a mute point, why? because as long as uni super (or any other fund) continues to deliver that service to some members and provides all other members with a return AFTER THOSE FEES that is still greater than the retail industry, enough has indeed been said.

Actually its a moot point, as well you are incorrect assuming advisers and therefore their clients use retail funds. Some so, the majority I know use wholesale fund portfolios, the returns and mind you costs of which are highly favourable if not better compared to many other products. For example before this last market drop my growth clients had made 19% over the past 7 months. This whole after tax return comparison between industry growth funds and whats left in retail balanced fund land is the moot point. It basically excludes anything we invest our clients in as planners.

Once called a trailing commission (with performance bonuses), got banned, today called an intra-fund admin fee for no service (to most of those members)? What a SCAM.

Drill down into UniSuper Directors remuneration and you will again find examples of their remuneration being directed toward union organisations.
This redirection of Director's fees to Unions must cease.
If the Directors do not wish to retain or receive the remuneration for their services, then they should leave the remuneration amount within the superannuation fund to benefit the members........when all said and done, isn't that the mantra that they all go by........" run only for the benefit of members" etc ??
Why is it that these monies can be channeled off to Union organisations of which many of the super fund members may not be and may never be a member of and therefore will never benefit from that financial support.
The funding of the union movement through transfer of Directors fees must be banned.

How does this amount compare to bank employees being directors of bank-owned funds and the remuneration going to the bank instead of the directors or is that still being kept secret and being deliberately ignored by IPA reports?

Ahah yes, it’s been a couple of months since we’ve run a story on super fund advice. Nothing like a divisive story to get the clicks and he comments. My two cents:
1) of course an SoA is provided. Seriously, you need to get to know your competition better..
2) why are advisers so concerned? The target market for scaled advice is presumably that which you’d rather not touch (lower balances and no desire to spend thousands).
3) unions receive directors fees because their trustee directors do the the job whilst employed full time. Their employers are simply being reimbursed for the work being done on their time. Employer directors have the same arrangement when they are acting as directors on their employers’ time. Not rocket science. And no, they shouldn’t do it for free.

"Last year we wrote and presented over 1,600 SOAs at an average advice fee of $520 per client." Jack McCartney

Are there any advice businesses out there able to claim they wrote 1600 SOA's for an average advice fee of $520 per client and remain profitable? I'd think not.

So how can big players afford to do this, and pay the likes of these salaries and bonuses? As a member of the fund or more so a Regulator that would be my first question......

Intra-fund is ETHICALLY wrong as all members of a fund pay for the service regardless of whether it is utilised or not. This is no different to “fees for no advice” that was slammed by the RC for the banks because they dared to have the expense as a seperate cost instead of hiding it in “administration fees” like the industry funds. Intra-fund advice should NOT be cross-subsided and paid for directly by the members getting their limited scope SOAs perhaps at a lesser cost than a more holistic SOA. Also, there should NOT be a carve-out for the Best Interest Duty obligations as currently exists within legislation for intra-fund advice, again as this is no different to the bank advisers who used to recommend the in-house product only because that was the ONLY product on their APL until very recently. Once there is a level playing field then advice will be more likely to be considered a professional service and until then it will merely be considered a sales function to grow FUM for the larger investment providers especially the industry funds!

Seems like a lot of pent up angst on this thread. Everyone seems to be talking about cross-subsidisation but I'm not sure that most understand how a profit-for-members model works. I would suggest that Unisuper advisers are probably responsible for a lot more than just providing advice, and would be running seminars, education sessions, providing general advice, hosting member events etc - all of these things are obligations a trustee has to its members. So I am probably not interested in how much revenue they produce in advice fees - better to understand how much in total it costs to run the advice arm and how much of their work involves meeting trustee obligations (which is work that probably could not be considered in 'cross subsidisation' terms). Doesn't seem to be affecting their ability to generate solid returns for their members either (though this will no doubt fluctuate). Something to ponder anyway.

@perhaps...your comment is extremely disturbing as it reads almost word for word to the mantra that the now departed bank advice models pedalled. How much salary will you pay me to advise clients to move to another fund...say on the back of fees...after insurance fees comparisons (particularly fun sport at the moment given massive group rate hikes and inferior terms...with no comms...what the? must be going somewhere???) and yes, even performance when all is carved out and examined properly...How long will I last as your employee when the % FUM/%Insurance Comms (sorry profit sharing)/per member $ admin fees starts falling because I open my eyes? The great myth being pedalled (and allowed to be) is that certain super fund groups have decided that the only way to measure performance is to measure against their pooled super investment options and in particular their default options. Hooray for comparing us advisers a great benchmark but is misleading at best and incredibly deceptive and unethical at worst. I gladly recommend certain industry funds where appropriate (particulalry when they already in them as the current reg environment is massively protectionist) but to not call this out (loss leading) as exactly the same VI business model as the banks can only be justified by those that are not only conflicted but even worse...blind faithful to the cause (in this case so called profit to members) Oh by the way nice performance figures from Unisuper but sadly is not open to gen pop. For those that are in DB Unisuper (and most others) there's a reason it's not available any more to new punters and Im relying on the too big to fail and they have 5 stars provision if they ever fail when I give advice to stay (which is almost always always)

The advice environment has changed, so too have many financial planner’s business models.

As a financial planner with 95% of assets under advice held in 4 industry and profit for member funds, it is the respect shown by leading (and also award winning) funds towards financial advisers helping mutual members/clients that should be reported by the media - so other financial advisers can adapt and survive in the new environment too.

Leading industry funds are supporting third party advisers by having dedicated customer service and technical phone numbers, online access to member data and contacting the adviser (rather than the member) when there are queries in relation to lodged forms. Sound like many features spruiked by advisers recommending platforms or WRAP accounts!

Another reason why platform and WRAP accounts are used by financial advisers, and the most important feature is the ability for financial advisers to deduct fee-for-service advice fees from members super accounts when the advice is in relation to the members interest in the super fund.

Many leading industry and profit to member funds allow advice fee deductions from a members account.

This is where UniSuper fails and the reason for their targeting by financial advisers.

While the UniSuper Trust Deed allows for 'Accredited' financial advisers to deduct advice fees, the trustee board to date has only accredited UniSuper Advice!

If a UniSuper member can't pay out of their pocket for advice on their UniSuper account, their ONLY choice is to use UniSuper Advice - quite a nice measure by UniSuper Advice to ensure a steady stream of clients.

If only Commissioner Hayne was asked this question; "would such protectionism be an example of 'anti-competitive' behaviour?

Mutual respect, you hit the nail on the head when you said,' Another reason why platform and WRAP accounts are used by financial advisers, and the most important feature is the ability for financial advisers to deduct fee-for-service advice fees from members super accounts when the advice is in relation to the members interest in the super fund'.

This is probably the only reason some advisers only recommend WRAPS and platforms (even though an industry fund is probably cheaper). Why don't advisers tell the clients this is the reason for a WRAP recommendation rather than the old and well used rubbish reason; ' The wrap has 250 investments to choose from'. Read ASIC's view on this reason in RG175 .

Industry funds are not cheaper. Im not sure if you are a planner or not, but if you are do a few comparisons and you may find they are actually among the most expensive options for clients now, mostly due to the high admin fees. Admin fees that of course go to subsidise any advice given, along with paying bonuses to those that refer onto the planners. So the admin fees pay the bonuses to the call centre staff, and pay the planners too, who offer loss leading advice, which of course wouldnt cover off rolling out of that fund if it was actually in the clients best interests mmmm does that pass the pub test? This is where the issues lay, as it skews the market totally. The clients are not actually being charged for advice they receive on a true market rate, they all pay for it , if they use it or not, and the admin fee pot is used like a magic pudding. All we want is a level playing field.

Billy, I don't see any examples in RG175 that say that. In fact one of the examples says it's appropriate if the client does want more choice and more transparent reporting, and sees value in paying a higher fee, if in fact the fee is higher. It's whether the client sees value + whether it meets the objectives.

It’s definitely not a level playing field. Big fund, big bucks, an advice department dipping into members money they see fit to splurge on multi tiered top heavy management structures that a kindergarten kid would illustrate as an inverted pyramid. For sure advisers cover their costs but how about the pen pushing managers collecting monster salaries and big bonuses which are based on the pressure placed on their ‘revenue generators’ - the advisers. This same Advice division publicly claims they advocate for gender diversity. Take a look at their 100% male leadership structure including all senior advisers, state managers, regional managers and executive manager. Cross subsidisation, anti-competitive behaviour, these suggestions are just scratching the surface.

Another day and another opportunity for Industry Super to get some fees from every member and provide it to very few (and general advice of course). Easy life but is it ethical?

For me the major issue with superannuation-centric financial advice these days is the fact that super trustees determine which advisers can deduct their advice fees from member accounts. This creates an inherent conflict of interest for the adviser as most clients prefer having their advice fee deducted from super. So, while a super fund may be in the best interest of the client, it may not be necessarily in the best interest of the adviser as they can't deduct their advice fee. The government could quite easily rectify this issue by simply allowing any financial adviser who is on the ASIC register and who is authorised to provide superannuation advice to deduct their adviser fee. Of course the super trustee can keep an eye on the fees charged to make sure they are not excessive.
This would be a major breakthrough as clients will receive truly unconflicted advice, advisers would be paid for their services and market forces would drive more competition between super funds and improve product offerings. Everyone wins. Such a simple solution - makes you wonder why it hasn't happened yet.

Goblin, the problem with this is that the Government is supporting all recommendations from the Royal Commission. One of these recommendations would ban advice fees from being charged to MySuper products. When you consider that if a trustee is doing their job, the MySuper option should be appropriate to most members, this makes things complicated where the corresponding implication is that that most advice should (theoretically at least) be recommending MySuper options. Thus the risk is that trustees would develop parallel investment options which replicate the MySuper option in all ways except for the MySuper compliance. An outcome which has say XYZ fund offering a "XYZ Balanced (MySuper) option" and "XYZ Balanced (non-MySuper) option" would be both risible and pathetic.

I disagree with your premise. Mysuper is the default investment option and is designed for disengaged members. Anyone receiving personal financial advice is going to be an engaged member and is likely not to have all their money invested in the Mysuper investment option.

So you are saying that advisers cannot be remunerated for servicing disengaged super members (ie updating address details, providing general advice etc), except those adviser paid bonuses by Default Industry Super Funds?

Well of course it's the default option, and of course it's designed for disengaged members, Goblin. Whose interests would trustees be serving if such an option wasn't designed for the majority of members, do you think? And what evidence do you have to suggest that the engaged members might not a representative sample of the fund membership?

I'm not sure what your point is. If the government's aim is to make financial advice a trusted profession, and if they want super members to receive advice that is truly in members' best interest then all super fund members should be receiving personal financial advice from non-aligned financial advisers. This will ensure that those seeking personal advice on their super are not limited to their employees' default super fund.
Also, the last time i checked, there were many other investment options on super fund menus rather than just Mysuper. The point of receiving financial advice is to become educated and aware of the many other options that exist, that will leave your better off.

If the 95 UniSuper salaried representatives only generated 1600 Statements of Advice last year, at an average cost of $520 each, each adviser only generated an average of 17 SoAs each. So if that equals approx $9,000 in direct fees, that means that about 90 percent of their salaries are being taken out of the UniSuper Member Admin fees. And not a single Fee Disclosure Statement of bi-annual Opt in Notification required. Nice racket if you can line it up.

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