Industry funds want expansion of intrafund definition

Industry Funds Services (IFS) is canvassing the prospect of expanding the definition of intrafund advice.

IFS chief executive, Cath Bowtell has told a financial planning session at the Conference of Major Superannuation Funds that the need for an expanded definition was already being canvassed and discussed in the context of the reality confronting superannuation funds.

She said the discussion around expanding the definition was being held in the context that the minute a spouse’s position came into the intra-fund advice discussion the rules changed.

“You become exposed to the full regulatory regime,” Bowtell.

She said the issue of prosecuting a campaign around expanding the definition was being pursued because of the current needs of members and it being a good time to go back to policy-makers and regulators.




I wouldn't give you tuppence for the intra-fund advice I've seen so far! Advice is advice and should be regulated the same no matter who or under whose auspices it is delivered.

absolutely not! Intra-fund advice is just another form of vertical integration. EVER ONE giving advice should be subject to same regulation, regardless who they are!

These are the same super funds who charge members for insurance products, without their authorisation, and in many cases the insurance is worthless as they can't be claimed upon due to minimum balance requirements or other loopholes. They scab flat-dollar fees from low balance clients, wiping out their balances in a matter of months. They label default investment options as balanced, despite some having less than 10% allocated to genuinely defensive assets. And now they want to be trusted with an expanded ability to provide financial advice, without the normal protections afforded to consumers! Are these funds for real? It's time for a big ASIC shadow shopping review, similar to the Life Insurance review 413 and the SMSF advice review. Let's see how the industry fund salesman ..... ahem .... customer retention staff .... cough cough ...I mean in-house, totally conflicted, employed financial advisers actually stack up when exposed to the same level of scrutiny the rest of the profession has been subjected to. Or are ASIC too gutless to take on these funds due to their obvious links to the Labor party?

Union funds certainly love a carve out don't they. Unfortunately their union mates in the ALP are more than happy to look after their comrades. Union funds should be held to account and play by the same set of rules as everyone else in the financial planning industry. It is just strange that nobody is prepared to stand up to the unions and their clear agenda.

What Cath Bowtell failed to really explain was that they want a carve out and do not want to be subject to the same level of compliance in the provision of advice.
At what level in relation to a fund member enquiry regarding their superannuation account is advice not deemed to be advice ??
Is it in relation to contribution types and methods, nomination of beneficiary planning and completion,
the level and type of insurance cover already included on the account or variations to that insurance cover,
the taxation applied to super contributions or the account earnings, the taxation applied to death benefit amounts or the asset allocation of the default investment option versus alternative available options ??????
These may well be common questions asked by super fund members if they contact their fund directly for intra-fund advice.

Intrafund advice is providing much needed basic advice to members about their super fund accounts. What they can contribute, what portfolio they should be invested in, what insurance they have and need etc. I don't think anyone can question that this service is an affordable advice channel for those who can't afford planner face-to-face advice all the time. It's an alternative, and it's valid.

Secondly, FASEA's code of ethics expressly requires you to take into account the broader, long-term interests and likely circumstances of your client, (reflecting section 961B of the Act). For example, any potential need for the client or one of the client’s family members to move into aged care accommodation in the near future would need to be factored into any financial advice you give the client. This means it doesn't fall under intrafund advice as family and other non-super assets need to be considered, and a full advice fee needs to be charged (ps. industry funds are not trying to wiggle out of adhering to legislation, actually, just means members have to pay for it separately). TLDR; here will be lots of low to middle-class Aussies who will not be able to afford basic advice on their super assets. Sh*t outcome.

Will there be enough face-to-face planners to deliver a basic service instead of intrafund? Absolutely not unless you all want to work 100 hour weeks. Will it be cheap enough? 100% no way, with the compliance burden. And tech is a long way off.

Now before you fly off your handles with the whole "retail vs industry super fund" diatribe, think of the bigger picture, and how it actually affects Australians.

Also, this article was poorly written and gave no information on what was actually spoken about.

Disgusted? Poo...
"Intrafund advice is providing much needed basic advice to members about their super fund accounts. What they can contribute, what portfolio they should be invested in, what insurance they have and need etc. I don't think anyone can question that this service is an affordable advice channel for those who can't afford planner face-to-face advice all the time"

The arguments which have already been had ie, conflicted advice leads to poor client outcomes, conflicts simply lead to more product sales, and the best one, if the advice is so valuable, then there should be no problem articulating it's value and getting the client to pay for it (and soon out of their pocket rather than the product) ALL apply equally to any employed call center staff or employed Financial Adviser providing such advice.

I am not arguing that this is not a valuable service, but I do take serious objection to the business model which funds this - charging ever single member a fee for those that use it. This is simply a fee for no service issue but has legislation saying it is not. It is a simple business model that allows unqualified employed staff (no bigger conflict than that) to provide "advice" on serious issues.

There is no other industry which I know where the "professional" (adviser) has such a financial and compliance burden and at the same time, allowance via legislation is made for unqualified people and completely conflicted employees are allowed to dispense the same advice. As an example you might consider, would you allow a Drug company employee to dispense advice with immunity but a Doctor can only dispense the same advice which the customer must pay for to cover the costs of compliance as the Dr is the one who is viewed as being conflicted?


@poo - Your defence of intrafund advice is flawed at best and misleading at worst. Hayne himself picked up on this in RC report saying that intrafund advice should NOT be personal advice (and I note that the FPA is trying to fight this....strangely) as in his view you can NOT meet the sole purpose test and provide cross-subsidised advice at the same time especially as only 14% of members use the intrafund service. Therefore, intrafund by very definition is completely conflicted and the argument that it deserves a “carve-out” because it is “affordable” is misleading because it is never disclosed how much it actually costs to provide an individual member with advice as this cost is buried in “membership fees”. This is why commissions for financial planners were banned in order to have transparency as well as eliminating “fee for no service” which is unethical. Until there is one legislation that covers ALL advice then there will never be a level playing field and if the definition of intrafund is expanded then you are looking at the reemergence of the one-stop advice shop just like what the banks and AMP used to be in the past before FOFA.

Disgusted - you seem to be a little confused. Allowing the product manufacture to provide advice that has no protection for the client and paid for by all members and provided to only a very small portion of members by staff who are not qualified and as employees, are completely conflicted in that giving advice that is not in the best interest of the product (more money in the fund) is your idea of a good way to treat those in society who do not have the financial capacity to pay for personal advice. Wow.
If it is true that conflicted advice is potentially detrimental to retail clients, then a system designed to provide the financially challenged with pure conflicted advice (and charge those that are not aware they are paying for it -this should be disclosed and those that want it can opt in) is in my mind very hard to justify - but you seem to have no problem slugging the poor with undisclosed fees which they have zero choice but pay.
Is that your way of helping the poor. Sounds like you believe in charging them all is in their best interest?

Why cant there just be one set of rules for every person giving financial advice?

How are call centre people able to give investment and insurance advice after a few days training under the guise of general advice with no Best Interests Duty or Statement of Advice. How are car sales reps able to give finance advice to set up a monthly payment for a car of thousands of dollars whilst an insurance adviser has to spend 3 years at uni to advise on a $500pa life insurance policy. How are real estate agents allowed to recommend mortgaging the family home to buy an investment property without any training or compliance.

And particuarly, how is it legal for sales reps at industry super to recommend changing super without fully assessing the clients current situation and needs. They need to be held accountable for giving this advice especially when clients lose proper insurances in their old fund and get the junk policies in industry super.

Its all financial advice. Just have one set of rules for everyone selling any financial product.

It's a business model. I reckon the real reason inter fund advice (and the charging of fees to all members for it) is to make a bloody good business model for the Industry Funds to out compete the retail funds. Financial Advisers are simply the foot soldiers that need to be dealt with to achieve this outcome - the war of Industry Funds and Retail funds.

Lets face it, Compare the pair ads have been around for years and years and a big part of that was "they don't pay commissions to adviser". This battle is lost but essentially, Advisers in my opinion were not that dissimilar to the current day Mortgage Broker (perhaps we should have called ourselves Super Brokers) and we basically gave the client the best product we had available to us. The real issue was not that we put people in products that paid us more (as any upfront commission can out and the client saw it - apart from NEF but they had higher ongoing fee etc) but we had dealer groups that restricted out product lists.
Commissions then became the issue and were seem as the problem that had to go - so in came the concept the concept of "fees paid by the client". Obviously, product manufactures loved this as it meant they no longer had to pay for a distribution channel and the FPA jumped on board with the drive to a profession (and a good little earner selling the CFP to all Financial Planners - remember, they own the rights to the CFP in Australia).

Suddenly you have retail providers trapped in tight spot where there distribution model - via planners comes with a couple of thousand dollars upfront fee that must be paid by the client (to get financial advice) and the Industry Funds (which are Unions running BIG money) can provide inter "fund advice" with such a low compliance burden that I would be surprised if someone on the phone for one day can't bring in more FUM and new members than a Financial Adviser could in a two weeks or more.

The arguments (backed by the regulators who seem to have no idea or an agenda) on Industry Funds having better performance is as we all know, false. The argument on conflicts and advisers being conflicted by commissions or volume bonuses no less applies to anyone (call center staff/employed adviser) working for an Industry Fund. Really, what would be the % of advice recommendations from an Industry Fund employee in favor of that fund? I suspect very close to 100% but we will never know as ASIC has admitted that they have NEVER investigated one Industry Fund.

In short, Financial Planner will survive, but as employees of the Industry Super or Directly employed by the Banks and AMP. it will be only a few that will be allowed to survive outside of this that are trying to move clients to the best product they can.

So for mine, they is no reason for Inter Fund advice to exist - if it is needed and affordability is the issue, let a qualified Financial Planner provide it much like a Doctor can, without the $3,000 dollar SOA. I'd do that all day if I could for a fee - and make no product recommendations and have no investment product failure risk. Makes me think, should I just do that as an unlicensed "Coach"?

You're spot on in this entire post. At the end of the day the reason why this all fails a simple logic test is because it's not designed to be logical, or right, it's the result of politicization of an industry for the profit of those able to control the implementation of legislation, simple as that.

I've come to realize this sort of thing has been happening in most industries over decades or longer, we're just the latest casualties and 10-20 years from now, none will be the wiser. (or remember, except us)

It is either personal advice or it is not. Personal advice should be under the same rules as advice. IT IS PERSONAL ADVICE

Once upon a time in Australia, we had competition and equal rules and equal approaches for competition for clients. Whether that be based on price, product, promotion. If someone wanted to pay more for better quality that was their own call. Now everything is controlled the nanny state - let's all have the same performance, let's all have the same fee, let's all have the same investments, let's bash anyone that steps out of line with a new view, let's bash anyone that wants to break away with a new model that they believe is a better niche for the target market that they want to service, let's tell everyone that paying slightly more fees for a better performance or service is wrong, let's change the rules that you can get rewards points or loyalty rewards for investing in a particular Superfund,

Welcome to not only the nanny state but welcome to the Matrix, where the real hidden agenda is yet to be played out. Maybe the possible agenda is to create a centralised pool of the public money that can be combined and the government can come calling when they need large junks of money and not deal with a number of small clients but through say 10 vehicles for infrastructure funding, Australia Industry Infrastructure Fund. Is that now how the advertisements are starting to play out. Try doing that if are an independent thinker about your money.

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