Industry funds want relaxation of advice rules

Industry superannuation funds are better positioned than most to provide low cost financial advice to members in a post-Royal Commission world, according to industry funds groups the Australian Institute of Superannuation Trustees (AIST) and Industry Funds Services (IFS).

IFS chief executive, Cath Bowtell has pointed to a likely softening of “the rules that hamstring low-cost simple advice”.

Speaking following a Melbourne symposium on advice in superannuation, Bowtell also pointed to the likelihood that a price would be paid by vertically-integrated groups.

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She said that while vertical integration of financial products remained lawful, the separation of product and advice was starting to underpin advice discussions that retail superannuation funds were having.

“Financial advice provided through profit-to-member superannuation funds has always been first and foremost a service, not a distribution channel,” Bowtell said. “As the market changes, and this becomes the norm in financial advice, the rules that hamstring the provision of low-cost simple advice could be relaxed.”

Further, she said the non-conflicted governance model of profit -to-member funds meant they were in a strong position to provide quality, low-cost advice to members.

“Profit-to-member superannuation trustees put members’ interests first and this extends to the financial advice their funds provide,” Bowtell said.

AIST chief executive, Eva Scheerlinck said the Royal Commission had proved yet again that there were problems with conflicted financial advisors but demand for quality financial advice was increasing.

“We know that the number of people who need advice is growing and there is a demand from members for advice on a host of financial matters” Scheerlinck said, suggesting this included advice on account consolidation, advice to spouses and advice on Centerlink entitlements.

“The time is ripe for the legal framework around advice – and how advice is described – to change,” Scheerlinck said.

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“Financial advice provided through profit-to-member superannuation funds has always been first and foremost a service, not a distribution channel,” Bowtell said." Pardon me Ms Bowtell, but how in hell is providing financial advice on only one Fund not a distribution channel?

Hmm. So Industry super is allowed to continue with the " compare the pair " adds whilst their financial planners continue to be inferior in the quality of advice they are able to offer. The industry Super Network worked very hard to undermine professional financial planners now it has come back to bite them. You get what you pay for and if the costs increase due to overregulation than so be it.

According to the Royal Commission, any Fund that only offers inhouse products is vertically integrated. Well blow me down me with a feather, isn't that what an Industry Fund is? You ring them, the only product they offer is an inhouse fund. Isn't that worse than retail funds? At least with a Big 4 or AMP planner, they can offer an outside product or give advice on one, whereas, the good old Labour (oops) Industry Funds can only offer their own badged product. They are worse than the others.

None of this comes as a surprise. From the moment the RC started, it quickly became apparent that things would be handed to the Industry Super Funds on a plate and any misconduct overlooked as the RC was told there was nothing to see here! Whats more alarming is that there are Industry Super Fund advisers out there employed by ISA that only recommend clients put their money in Industry Super Funds, without considering other funds or even a clients current fund. How can they effectively discharge their duties as adviser with this level of conflict and bias, especially when bank planners copped a roasting for doing this?! I recently lost (nearly lost) a client to Hostplus and as the Industry Super Fund adviser failed to adequately do their due diligence and advise the client that the super platform would deduct some $11000 capital gains tax upon rollover. Whilst the client was initially sold on the admin fee saving, it would have taken some 14 years to re-coup the CGT, compared to waiting until client was old enough to commence an ABP down the track. Thankfully the client had the courage to come back to me and a complaint will be made!

Concerned, you won't get many opportunities land on your plate like this one at such a critical time politically. Can I suggest you take this to your local member (if they are not Labor) with your clients permission (or the clients local Federal Member and show them what the Industry Funds are doing and how ASIC has NEVER investigated a single Industry Fund. ASIC is now looking at Industry Funds but will likely come out with a wonderful report card (they are looking at something like 35 funds in 12 months so not much time to find issues and it would suggest the report is almost written considering ASIC has already stated in a Senate hearing that they dont expect any issues. We all know their are issues and this, if an SOA is on hand from Host Plus, is gold. Demonstrates they are completely conflicted.

Whats more alarming is that there are Industry Super Fund advisers out there employed by ISA that only recommend clients put their money in Industry Super Funds, without considering other funds or even a clients current fund. How can they effectively discharge their duties as adviser with this level of conflict and bias, especially when bank planners copped a roasting for doing this?!

is this true? do they have a special carve out rule for them? isn't this what banks got large fines for....

If you realise that the big Industry Funds are now the new AMP, why should low income fund members be disadvantaged against if they are not members of Industry funds? If the Industry funds agree to do away with annual opt-ins for non-industry fund members, their proposal could then be considered.

ISA needs to be banned from providing ANY advice, as vertically integrated and conflicted.

Let the fund stand on its own merits and if it is worth it, external planners will recommend, if not then it shouldn't be artificially propped up by restricted product advice - just like AMP and banks couldn't any longer.

I question why unions are even in superannuation, given their publicly available information on links to criminal activity?

" non conflicted governance model" ????
How on earth is the advice received through an Industry Fund employee representative, customer admin staffer or employed adviser NOT considered conflicted and tell me how that advice meets the Best Interest Duty ????????
This is the most insane concept I have ever heard.
The level playing field is about as level as Cath Bowtell's comments ,which are unhinged.
They see themselves as completely different and should be quarantined from the same set of regulations governing the rest of the retail superannuation platforms.
They don't want to be made to play by the same rules...they never have and they don't want that to change.

one product that you can give advise on = vertical integration at its worst.
so over the sanctimonious bleating's of the industry super funds

A related issue is scoping areas out of advice. "Client only sought advice on use of XYZ fund." Is this systematic or a periodic occurrence? I would suggest the former.

it is worth remembering that all of this FOFA red tape was created by Labor & The Greens, at the behest of the Industry funds to hijack their competition. Now they are enjoying a monopoly status, they want their cake & eat it too. Note their admin fees & insurance premiums are rising....not enough competition

I work as an adviser for a super fund, providing intrafund advice. I hold undergrad, post-grad and financial advice specific qualifications. Our fund does not provide advice on opening new accounts or consolidation of funds as an intrafund advice service.

Clients are told before they meet with us and then again during the meeting that this advice is only regarding the funds within their superannuation account with this fund. They can receive advice on how their money is invested, contribution rules and caps and the level of insurance they hold with the fund. They receive an SOA within a week (usually within 2 days). They don't have to pay an additional fee for the service.

If they have more complex advice needs or require advice on consolidation (to us or another of the several funds, both retail and industry depending on client needs and goals, on the APL), they're referred to an adviser that doesn't have these restrictions on them.

I don't see how my role fits into the 'evil and conflicted' distribution stereotype peddled here, but the vitriol flows so freely on these article comments. I certainly provide a retention benefit indirectly, by doing a good job and providing good service the people I speak with know they are on track and as a result are less likely to seek advice elsewhere.

I have appointments every week with people who have previously been recommended an SMSF or a wrap platform with a 15 fund portfolio that needed quarterly rebalancing; they're usually very unhappy with the complexity that added to their lives and extremely disappointed with the returns they achieved even before advice fees had been paid.

If more advisers could make a living out of providing advice on the usually adequate funds a lot of people find themselves in, they would, however as many can't demonstrate the value they can add without using a fancy product to sell the advice they are stuck perpetuating the same old cycle.

So you are earning a salary, and the hidden admin costs imposed on the fund members are subsidising your income, whether you provide them "advice" or With the luxury of no Opt-Ins. What a racket.

Well the admin fees are clearly disclosed and are still some of the lowest in the country, so I sleep easily at night. You can put advice in quotations marks if you like, it doesn't change the fact that the people I speak to are getting personal financial advice.

70% of the people I speak to would not normally be on an adviser's ideal prospect list; you don't want to service them so what is the problem with someone else doing it? Your cynicism is counter-productive.

No, its not cynicism. It's disgust at the inequity of the legislation playing field in place now. A very clever technique to cement the monopoly of Industry Funds. Effectively you are being remunerated without meeting (soon to be annual) opt in regulatory requirements. This is simply wrong, and flies in the face of the Royal Commission findings, to be frank.

So you are issuing a complete SOA for every one of these people you speak to as per the requirements of providing personal financial advice ?
If advisers are receiving so called "conflicted remuneration" via grandfathered commissions on the basis that the product provider and not the client directly is paying the advice cost and in addition to the notion that being paid by a product provider may influence the advice provided because of a payment or reward , then surely, an employed adviser who receives their total remuneration from a single product provider and only provides recommendations in relation to that one product provider is conflicted by definition.
This is not to say the advice provided is not of a high standard or suitable to the member's needs, but the playing field MUST be level and equitable for all.
If you are providing personal advice ...the same rules apply across the carve outs, no exceptions, no excuses.

Well said Agent 86. All this will come back to bite the industry funds eventually because the arguments they use are the same ones that can be used straight back against them.

I think there is a need for both limited advice and to be frank I would love to charge a client directly for an hour of my time giving limited advice like an accountant . The fact is companies and banks have been getting smashed for things and the industry funds are doing the same things just calling it another name Intra fund advice = fee's for no service....

Funny that even in the Industry fund working paperers arguing for Intra fund advice called it personal advice in the paper. I have noticed they deleted this from the industry fund website since the recent out cry against intra fund advice... this has only been removed in the last 6 months from the website. very interesting.... lucky I have already saved this PDS ....

Gov R Gangsters, eventually will be too late for some of us who have had enough. I do not know why the Industry Funds have been able to do what they want when they want without any cost or loss of name them. They are exactly the same as the Big $ & AMP, yet for some reason, they have always been treated differently. How the hell can you compare the pair, when they invest differently to retail funds, do not get yearly valuations on their property like the others do (Refer to the GFC when they made a profit for members each year as they held off on the revaluations of their property portfolio until values had gone up again). Their Balanced Funds vary from 50% growth assets up to 85% growth assets, it is not a level playing field and never will be until ASIC & APRA put rules in place for all Super Fund providers.

It’s not that we don’t want to service them (we very much do), it’s the costs we have to absorb to do so is beyond what’s feasible for them o pay. If we could have the carve outs ISA are seeking, we could also deliver low cost advice to small balance members.

the carve out being total removal of annual opt-ins, which is ridiculous. Doesn't apply to Netflix, Telstra, Optus or Health Insurance services. Then you wonder why low income earners cannot access service.

You sound like you're conscientious and doing exactly as you are told to and clients are happy with you. That was the same for a large % of planners in AMP, the banks and other insto's. The issue you are missing is that the system has been corrupted and the status quo has landed in an obscene spot, much akin to the 'segregation' era in the US when white people were deemed superior simply by not being any other race. ISA has an artificial misguided segregation carved out by a corrupted system that doesn't base a person's value (or advice provision) on a consistently objective basis, but rather an extremely biased and fundamentally flawed approach as abhorrent as apartheid or segregation ever was.

The conflicted remuneration is this. Those who don't receive your personal advice Clarification, but pay the same admin fee as those who do, are effectively subsiding the advice being provided to others. Simple fix will be at the end of each financial year, refund part of the admin fee back to all members who did not receive any personal advice during the year. That would be fair. Otherwise, you are overcharging these members.

I appreciate that perspective, but many many products and services are provided on that basis. We all pay a Medicare levy, but some people take no prescription medicine and might see a doctor once every 2 years. You don't get that levy back just because you didn't use the service that year. Every member has the opportunity to access the service, but many choose not to. If you have Foxtel but only watch 3 channels, you don't get a rebate because you chose not to watch the others. They were available to you, you chose not to use them.

Cross-subsidisation is widespread, commonplace and accepted in most facets of our life.

For what it's worth I'm not advocating for carve outs or special consideration, only providing a viewpoint that is not offered often in this forum.

This is exactly how adviser commissions used to work, which they are now band to be used by every other planner in retail world under FOFA.... why is it ok for industry funds? this is what pisses most planners off, one rule for you one rule for you always say its got to make clients better off or better access for advice and all they do every time is make it hard for consumers and advisers to do business. Same think with LIF only brought in because they realized that Australia has an under-insurance problem rather than supporting advisers to make it easier to give advice they bring in general advice and let companies push junk insurance. It should be the other way around advisers who give advice on good quality products should be able to sell on the spot and the group insurance should be providing the SOA.

I work under similar, but different, conditions (broader APL, broader scope, holistic) for a fund. However when someone seeks our advice on the same things you advise on, or if we refer them to more 'limited' scope ie contributions, they still are required to pay an advice fee, which although not 'commercial' in a profit making sense, is still required to cover the costs of the advice - ie not subsidised by other members and is therefore is still a reasonably significant amount of money.

Interested, Can you only recommend one fund still? or when you say broader APL you mean you can only just give more advice on insurance choice? I would love to know if you can compare the pair against other industry funds?

With super industry and govt (inc DB) with some retail. Multiple (about 5) insurers and non super investment providers (about 4). In reality its often only retail platforms for non super or grandfathered centrelink. We have model portfolios for the retail options. With super, yes, compare the pair (watching out for the defensive allocation to property, non investment grade bonds etc of course !). Majority of time members are in one fund and remain there unless compelling reason to change it. Not incented to move money into fund.

Cath has lost the plot - advice isn’t simple when delivered compliantly, just because your APL is simple you can’t shirk the law. Ohhh wait yes you can because you own and distribute your own product!

"Industry funds" have become AMP run by union officials. And when Cath Bowtell describes them as "non-conflicted" you have to wonder if she has become the new Catherine Brenner.

Simple answer; I suggest that product or platform manufacturers (BT, AMP. Colonial etc) should have limited advice rep's that are solely allowed to speak to people about rolling into or retaining funds in their product with no other considerations provided. Judging by the idiocy displayed by Bowtell, this has to then be compliant and fine by ASIC.

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