Intra-fund advice has created advice unfairness

A ‘cone of silence’ exists around intra-fund advice that has created an unfair legislative environment that favours one group of financial advisers over others.

That is a central premise of a submission to Treasury by West Australian-based financial adviser, Steve Blizard who said he believed there had been excessive media focus on Future of Financial Advice (FoFA) legislation since 2013, but virtually nothing about intra-fund advice payments “whereby default super fund marketing representatives and their advisers are remunerated”.

Within his submission, Blizard has cited examples (contained within the Financial Services Guides (FSG) of industry superannuation funds of those funds paying ‘bonuses’ of up to $40,000 to financial advisers.

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“While bank staff have been totally banned form earning sales bonuses, many Industry Super fund staff and advisers are permitted under the intra-fund system to earn ‘performance bonsues’, in additional to receiving complimentary gym memberships,” his submission said.

“While intra-fund advisers deliver a certain level of compliance information for clients (i.e.Statements of Advice for rollovers), they do not have to comply with any other form of FOFA red-tape, such as annual Fee Disclosure Statements, nor do they have to chase up bi-annual Opt Ins, simply to get paid.”

“Instead, most intra-fund staff and advisers are remunerated primarily from collective administration fees automatically deducted from all super fund members,” Blizard’s submission said.

His submission argued that collective administration should only be charged by superannuation fund trustees for simple administration and provision of general factual information to fund members.

“Collective fees should not be charged to members unless the fund trustee obtains annual consent from members for these fees to be charged as administration fees from their fund,” Blizard’s submission said.

He said that, alternatively, all advice fees provided by Default Funds should be charged on a ‘user pays’ basis with informed consent provided by the fund member in advance for those fees.

“Any other form of personal advice should be charged directly to the member seeking advice, and not paid for by other members who are not receiving that advice. All advisers employed by that Trustee, who are providing financial product advice should not be remunerated by other members in lieu.”

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Bozo, you are very correct. But don't forget to also include the amounts that they keep back on top of that for the Investment and Administration reserves. They are Indirect Costs as well.

Ken it's the principle! What if 50% of the members all last for advice? there would never be enough advisors in the industry funds to handle the workload!! Why can't people understand it is the principle of the whole thing!!! One set of rules for us and a different easier set of rules for them which allows them to keep their millions of members that they all charge service fees knowing they will never call for advice.

Actually, according to Superratings i don't see any retail funds. FACTS PLEASE.

As at 31 December 2019


Balanced (60-76)

5 year
Rank Fund Investment Option Return Return Period Website
1 Hostplus - Balanced 9.51% 5 year More Info
2 AustralianSuper - Balanced 9.41% 5 year More Info
3 Mercy Super - MySuper Balanced 9.32% 5 year More Info
4 Cbus - Growth (Cbus MySuper) 9.15% 5 year More Info
5 UniSuper Accum (1) - Balanced 9.06% 5 year More Info
6 Sunsuper for Life - Balanced 9.02% 5 year More Info
7 MTAA Super - My AutoSuper 8.73% 5 year More Info
8 CareSuper - Balanced 8.59% 5 year More Info
9 Media Super - Balanced 8.59% 5 year More Info
10 HESTA - Core Pool 8.40% 5 year More Info

Speaking of FASEA standards, Standard 7 states advice must represent value for money. If you are providing fair value how is someone able to profit from the advice provided. Retail is dead demonstrated by the number of advisers leaving the industry and banks ditching their advice businesses.

Yes wilddog and then we get into which Ratings company do we believe? Who gets the most money from particular industry sectors and who has a looser return report process. For example, a competitor company does rankings based on risk adjusted returns (technically the correct way) and comes up with a very different list. I agree, Retail is dead - but the majority of advisers don't use Retail, they use wholesale wraps and they are very competitive fee wise.

Wilddog, do you place HostPlus Balanced Option at 76% Growth?

Check again 'wondering'. There is zero in cash, zero in fixed interest, the only defensive asset is 7% in credit. The 24% defensive allocation is mislabeling at it's finest. HostPlus rolled the dice with other people's money and it paid off. Even our minister has rolled her super into the fund. I'm sure past performance had nothing to do with it!!!! Soon enough, interest rates will start rising and valuations for these assets will get hammered. They won't even see it coming. Maybe then some of these know-it-all bureaucrats (who think past performance and fees are the only things that matter) will start seeking out advice - but there won't be any advisers left, except a select few who charge through the nose and have books that are closed (like me for example).

Giggity, I agree with you - but I'm not sure Wilddog does. Looks like Wilddog has had a large gulp of the sake oil and believes the Industry Super ads on TV.
I just hope Wilddog is not an Adviser - but perhaps an Adviser working for a product provider at best.

A fairly reported asset value would get hammered but we all know they don't use fair market valuations but rather retain values that incorrectly inflate values - but according to ASIC that is perfectly acceptable by their union mates who fly them first class to sports events in the corporate box.

Hey Wilddog - Advisers have long argued that industry funds fudge the numbers when it comes to asset allocation, calling something Balanced when it's really High Growth but get away with it. Now we've been vindicated, go and look at APRA's own heatmap spreadsheet and you'll see that Hostplus Balanced has a 93% allocation to growth assets. Doesn't quite fit with the 60-76 category you're using there does it.

You've been spoon fed rubbish information and just taken it on face value. On a like for like basis Hostplus performance is not great at all, nor are most of the industry funds. The bigger problem is that people don't realise how much risk they're taking with their money. When the next GFC rolls around, funds like Hostplus will be found out, just like MTAA Super was.

Wow, you really are even more pathetic than I imagined if you're pulling that old chestnut out as 'factual evidence'. And love to see the "I'm so offended' side coming out true to form.

Now that you've been vindicated I suppose the other 9 top performing funds are also overweight?

Profit to member super funds will dominate the advice space in the near future as evidenced by the mass exodus of unqualified advisers leaving the industry. Oh my, I have to follow a set of standards and complete an ethics subject. The rivers of gold have finally dried up.
Last week I saw an SOA with over $9k ongoing advice fees managing less than $1m in a retirees income stream. Adviser must be adding ALOT of value.
Must be investing in the 28 funds outperforming Australian Super

Of those only Aussie Super with a growth allocation of 75% would actually fit into the 60-76 category. All the others are above 80%.

Might wanna check the heatmap
Aussie 74%
Cbus 75%
Uni 68%
Care 74%
Media 72%
Hesta 75%
But then again those numbers are probably fudged too

And you've just confirmed the problem - After the heatmap was published the CIO at Hostplus said that they were going to have to revise how they categorise assets as it doesn't look favourable for them to have a 93% growth allocation. In simple terms they are going to start calling more of their unlisted assets defensive so their performance compares more favourably.

There is zero transparency with industry funds, they decide how to categorise assets based on fitting into the Balanced category. If you go to the websites for all of those funds they have 80% plus invested in growth assets provided you are using the traditional asset class categorisation e.g. unlisted property is growth, it can never be defensive. ASIC themselves define defensive assets as cash and fixed interest but they don't policy the way these funds are reporting the asset allocations.

No one can make a meaningful comparison between funds with the system as it is now.

How many Members of Industry Super are there Wilddog? All being charged a fee for a service that most don't receive, many never, but it is charged every year, and if they do receive a service, does not have to be in the Best Interest of the Client as it is only product sales related.

So Wilddog, what is the total annual $$$$ value of the Intra Fund Advice Fees being raise by 1) Australian Super
2) Industry Super in total.
They, how many Financial Planners does Australian Super employee - and how much do they charge out in Advice Fees?

I'm wondering how many industry funds were dragged through the Royal Commission for inappropriate advice? How many have gone through an enforceable undertaking or paid out remediation? Just wondering. Also wondering about the relevance of the FPA when CFP studies are not recognized by FASEA

Ah, the old "there's absolutely nothing wrong with what we do because the regulators have never stopped us" fallacy. AMP could have used that argument any time up until the early 2000's. Storm could have used that argument up until about a year after their model blew up.

Lack of regulator action due to regulator incompetence or bias is not an endorsement of union funds, just as it wasn't for AMP or Storm in the past. Sooner or later a competent, unbiased regulator will expose the scams and lies of union funds. Until then, that job falls to professional financial advisers. That's why the union funds and their Labor Party puppets and fellow travellers working at ASIC are so focused on eradicating advisers.

Yet another factual error (or is that more deliberate misinformation?) Wilddog.

CFP studies are recognised by FASEA for 2 units of credit, on top of 2 units of FASEA credit for DFP/ADFS which is a CFP prerequisite for advisers whose degree wasn't in financial planning. So advisers who have completed CFP studies get at least 4 units of FASEA credit.

And for those that got their CFP off the back of a cornflakes box? How many credits do they get? Heavy lobbying by the FPA to stay relevant, I guess they need to justify the $1,000 + annual fee....just like the ongoing advice fee charged by many advisers for no service

Grandfathered CFPs rightly get nothing, because they didn't complete any CFP studies. But you said that FASEA didn't give any credit for CFP studies. That assertion was based on personal bias and "pseudo facts", but is fundamentally untrue. Much like your assertions about union funds.

The Royal Commission finally disclosed the unethical behavior and practices of banks and their advisers. Not for profit super funds have a stellar history of taking care of members and providing effective and caring advice. I know of one Not for profit super fund that provides valuable intra-fund advice and an advice fee is charged where advice falls outside of intra-fund advice.

The Government and regulators need to stop asset based fees which are akin to a commission. Flat fee for service should be charged like other professions. Many so called independent non-aligned advisers convince themselves that they are providing value for their service when they charge exhorbitant fees that are clearly not value for money.

Well done Industry funds and Not for Profit Funds.

Clearly an idiot with no grasp of the reality behind the scenes. Or perhaps more a muppet ISA employee typing the tripe the masters are paying to have said.

Sounds like Joey Joe better stock up on non-perishable goods as the rivers of gold are drying up finally

Ah yeah wow you really got me with that one, ouch please stop. Like talking with my 4 year old son, except he shows higher levels of intelligence and ability to rationalise and debate. Hard to have a battle of wits when you're so clearly unarmed.

Well done Industry Funds.

Intra fund advice including that provided with advice fees has been great for Australians.

There are some fabulous funds that really engage well with members and provide effective advice that puts their interests first and puts them in a better position for retirement.

The Royal Commission disclosed the absolutely criminal unethical behaviour and practices of banks and some of their advisers.

The industry needs to take a good hard look at itself.

Want to be called a profession when they charge asset based fees that are akin to a commission.

I have seen some exhorbitant advice fees charged to retirees that are clearly not value for money. Clearly not acting in clients best interests.

Industry funds and not for profit fund advisers do a great job.

Well done Industry funds and Not for profit super funds.

Great returns and great service

Dear Ethical, I believe you are making claims here that are difficult to justify or back up with hard evidence.

" provide effective advice that puts their interests first and puts them in a better position for retirement"
If you are talking about Intra Fund Advice here this claim is simply a claim. No "advice" under Intra Fund Advise would have any documentation to substantiate that claim as Best Interest Duty is not required - but I guess you know that as you didn't quite say it was in the "Best" interests of the client. I believe Intra Fund Advice is product advice at it's core.

"really engage well with members"
How often does an Adviser personally speak to each and every member? Remember, in the world of a Financial Planner, ASIC does not see much value of service in Newsletters etc.

"The Royal Commission disclosed the absolutely criminal unethical behaviour and practices of banks and some of their advisers."
Yes it did, but that does not mean we are all like this.

"Want to be called a profession when they charge asset based fees that are akin to a commission." "Industry funds and not for profit fund advisers do a great job."
I somewhat agree that while your term "Not for Profit Fund Adviser are being called "Advisers" but are paid for by a product provider, they will always be conflicted to provide advice for the benefit of their employer and this profession will never escape.
Having a Trustee charge members a fee for this advice and delivering it to those that need it is I believe essentially the same model as commissions. In light of the justifications used to ban grandfathered commissions, I find it difficult to see how Intra Fund advice fees, charged from all, requiring no actual delivery of service and no BID, and being used to pay staff to maintain clients/members in the in house product is ethical. But you do.
I would just like to see the same rules applied - but I suspect you don't.

There wouldn't need to be so many rules if advisers did the right thing in the first place and didn't take advantage of so many, and they still do. For example the other week I saw a client invested in a wrap platform where the adviser was charging an ongoing service fee of 2% to invest in cash! Client was unaware of this and were furious when they found out there trusted long term adviser would do this to them.

I've seen trauma policies rewritten because new conditions were added to definitions not because it was better for the client but because the planner received 100+% of the first years commission.

Completely agree with you Ethical

I could go on and on with the dodgy sh!t of seen in retail practices. I've not come across anything like this in my time within Industry funds

I don't disagree both those appear poor. But to say it doesn't appear in your own back yard or in other guises is incorrect, or you are all robots. To earn a bonus requires a certain type of behaviour - anywhere and any industry.

Appear poor! Outright disgusting! Just saying in my experience in both retail and not for profit the culture is very different. Bonuses are typically paid on the amount of members an individual is able to assist not the amount of FUM. Whether the individual has $1m or $1 there is no difference to attribution of targets. Where I have worked previously the dealer group adviser of the year was the adviser who generated the most FUM. How can this be in the clients best interest?

So to earn the bonuses you focus on numbers meaning looking after people with simple needs and turnover, and neglecting anyone who may need a little extra time, not necessarily complex advice. Real helpful and also conflicted.

Ah so in your version of reality, little miss delusional, it is wrong for advisers to be dodgy or charge high fees but perfectly acceptable for management, board and directors, investment managers of the union controlled industry super to be dodgy and charge criminally high fees for 'consulting'? Gather that your sense of right & wrong is that as long as the crime is big enough to affect everyone in a fund on a multi-million dollar scale then it is better than individual advisers charging for their efforts.

Must be great living in a fantasy realm of LaLa Land, will have to pop a tab and come visit you and your pink unicorns sometime.

Ah so in your version of reality, little miss delusional, it is wrong for advisers to be dodgy or charge high fees but perfectly acceptable for management, board and directors, investment managers of the union controlled industry super to be dodgy and charge criminally high fees for 'consulting'? Gather that your sense of right & wrong is that as long as the crime is big enough to affect everyone in a fund on a multi-million dollar scale then it is better than individual advisers charging for their efforts.

Must be great living in a fantasy realm of LaLa Land, will have to pop a tab and come visit you and your pink unicorns sometime.

Joey Jo, You started drinking already?

No, but clearly I need to to try to attain your level of lucidity (or lack thereof) around these issues.

Must be an awfully easy wonderful life living with those blinkers on so that all you know is what you're allowed to see and hear and never having to think one original thought. Bit like AMP version 2, but run by those wonderfully ethical union thugs that their RC found had largely been taken over by criminal elements.

Wonder how or if you would make it if you had to actually come up with real advice and commercially rely on the value you bring to the table, deary? Kinda guessing the answer from your comments to date, hence the hiding in the pockets of ISA to pay your way through life. Good on you for taking the easy way where the issue of ethics and real advice has largely been eliminated for you, little poppet.

Commercially viable for yourself or the clients you profit from?

Wow, another example of scathing wit, please help my fragile ego from your unfailingly acerbic prowess... yawn.

But to answer your question; both, thanks for asking. We have private clients who happily pay us in excess of $120k pa. due to the value we bring. These are well educated, astute business or ex-business people who weigh up advice for themselves and know and appreciate real value, poppet, or else wouldn't deal with us. You know the type that don't suffer fools; but then again, no, judging by your comments to date you don't.

Please keep going, this is entertaining.

Changes to the financial planning industry are not aimed at your well educated business men paying $120k for the value you add and tax avoided. They are aimed at the mums and dads of Australia being exploited. Now its getting harder to exploit these people masses of advisers have left the industry and banks are shutting at shop.
By the way i do find it entertaining and get a laugh at your wit on the odd occasion

How many Jordan Belfort seminars you been to? He demonstrated value to astute business men too.

4 minute delay to add that last bit? Really? Did you have to stop to chew in that break?

For that length of time I would have expected far better, but then again there I go expected more from that empty fuel tank driving your cognitive capacity.

Jordan was small fry, get some real education (seem to have to tell you that a fair bit) and read about Jho Low in 'The Billion Dollar Whale'. Aside from ironically owning the production company that funded Jordan's movie, JL's 'fund' ripped off and fooled entire financial institutions, government bodies, auditors, wealthy business people and individual investors by purporting to invest their capital into complex schemes, false commodities, unlisted alternative assets, and over-valued building transactions, all the while charging exorbitant consultancy fees at both ends as well as investment management fees (in amongst the boringly everyday activity of misappropriation).

And I'm guessing you have that slack jawed look on your face, as all that sounds somewhat oddly familiar; it's probably because the resemblance bouncing around and resonating inside that cavernous cranial cavity, is your firsthand experience as a paid employee of how IFM and Industry funds conduct their business.

Phone rang and with my empty tank i find it difficult to do more than one thing at once.
Jho Low - sounds like someone you look up to. Picture of him on your desk?

Wilddog you wrote "Commercially viable for yourself or the clients you profit from?"
It seems you are the one receiving profit for your labour via your salary, all charged to the members of your particular Superannuation Fund. Your salary cost, your rent, telephone, computer end time here are all paid for via a fee, charged to all members of your fund by your employer - many client whom you have no relationship with and I suspect have never met let alone personally spoken to yet they are being charged a fee to have you there. Enough of your ethics thanks.

Still cheaper and better performing and enables those who couldn't afford to get advice get advice, you know those that need it through divorce, death, health, been burned by their retail planner or bank, etc. and aren't as lucky as some. Just like we all pay taxes, helps those less fortunate.
Members are free to leave but they just to keep joining for some crazy reason. Must all be silly enough to believe everything they hear.

Dear Wondering.

Let me make it very clear that most financial planners take very good care of members and clients both in Super funds and outside of super funds.
I do not have a conflict and will always act in the best interest of my client. If a non-member of our fund seeks advice on consolidating external super into our fund they receive advice that is in their best interests. If it is not in their best interests to transfer the external super to us I recommend they don't. I will have no problem with meeting FASEA standards.

You know that an administration fee charged by a profit to member fund is not a commission. Where an advice fee is required to be charged to members for advice that is outside intra-fund laws we do.

Profit to member funds are here to stay.

No more to say.

Hi Ethical, but the profits aren't all going to members - it is easy to track the profits paid to the head body that they all own - how do you think one exec got $12M? Normal salary? They have publicly stated they aim to generate a 25% profit on that business.

The fund I am with is not a member of the ISA. It does not pay anything to a head body.

Ah so Sunsuper or Qsuper? And sure, the Qld Govt gets nothing? So QSuper invests heavily with QIC that pays the Qld Government a large dividend every year - profit for members?

And I will say re QSuper, they charge their Admin Fee as a 0.16% per annum, not a headline low member rate, so at least they are not trying to play that game.

I thought i remember the dude from HostPlus admit that they violated the sole purpose test by providing incentives to employers to attract members.
So it seems even the ethical, law abiding industry funds are knowingly and purposely breaking the law.

The law breakers were the ones collecting advice fees and not providing any service to their clients as they had agreed with them.

Separate the advice fee from any product and make it a flat dollar amount that is paid directly by the client.

Ok, ok, ok, I finally get it
- Intrafund advisers don't have a best interest duty and are really only product advisers
-Industry funds haven't got pulled up in the Royal Commission or paid out remediation because the system in corrupt and people that make the rules have an association with industry funds
- Super ratings and other comparison websites are factually incorrect and biased
- Industry funds misrepresent asset allocation and investment returns, they are not independently audited
- 28 funds outperformed Australian Super yet they are not listed as top performing funds, because....well I don't really know why. Probably someone is corrupt, mislead or spoonfed

This sounds like a very serious case of SOUR GRAPES. There is treatment available these days. Might I suggest a visit to the GP before the condition deteriorates further to verbal diarrhea which is a lot harder to treat I have heard.

Come over to La La Land and ride the pink unicorns, it sounds like you would be a lot happier now that the gravy train as been pulled into the shed.

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