The cost of delivering intrafund advice ran to over $1.27 million for one of Australia’s largest corporate superannuation outsourcing providers, Mercer, last year.
Mercer has provided evidence to the House of Representatives Standing Committee on Economics that the cost of intra-fund advice as $1,271,000 for the year ending 30 June, 2019, and that this averaged out to approximately $6 per member.
Mercer noted that the cost of the intrafund advice was included in the administration fees charged to members and was not a specific fee to members.
Like a number of industry funds, Mercer made clear to the parliamentary committee that it was running an out-sourced model and that it had an arrangement with a service provider for intra-fund advice to be provided to members.
“Advice fees can be paid from member accounts at the request of that member, with the proviso that the advice relates to superannuation. MSAL does not charge any other fees for advice/financial planning,” the company said.
Comments
Given that approx 1000 financial advisers are receiving approx $100,000 pa plus bonuses of up to $40,000, at least $100 million pa must be being paid to these advisers "collectively", across all super funds. All of these fees are deducted automatically without any red tape compliance being imposed on them like their competitor advisers. The question remains: How can the Fed. Government permit 1000 advisers to be paid to give personal advice (according to ASIC) without those fund members providing informed consent for these fees, and without any option to "opt out" of these fees - often for advice they never receive (fees for no service). Either this racket is shut down, or opt ins should be removed from their competitor advisers. You can't have both. This is simply unjust.
If you can't beat them, join them Steve!
100% correct.
Yet again we go through this same analysis every single time and nothing ever happens because the Govt are too gutless to tackle it. Now the Liberal Govt are getting into bed with the unions on Industrial Relations reform and I don't see that courage is going to be coming any time soon to shut down the industry super funds intra-fund advice racket.
The Liberal Govt appear ok with the fact there are 2 very differing sets of rules.
The Libs are trying everything to be flexible with the unions because they know an election is not that far away and the lead time is crucial....it is about votes and retaining power.
Again we see a fee charged to every single member of a superannuation fund for the access to advice.
It is simply a retainer fee paid for the access to services, not only for receiving those services.
Again, if these super funds can charge a retainer fee, then why cant advisers charge all their clients a retainer fee just to have access to the adviser at anytime. If the client does not access the adviser throughout the year, the fee is still charged.
If the client requests strategic personal advice, the normal process and appropriate fees are charged.
This is wrong in that many members are paying fees for other members to access and receive advice.
The cost is spread across all members, but only some members will receive the services the fees are charged for.
So, many members of superannuation funds are subsidising the cost of the intra fund advice delivered to other members.
Corporate Superannuation fund business for advisers allowed the adviser to be remunerated to provide access to the adviser and provide advice to all members. This remuneration was banned as grandfathered commissions.
Interestingly, the grandfathered commissions were paid from the product to the adviser from each members account.
Intra Fund fees are paid from the members account for every member and yet they are able to be charged whilst commissions have been banned.
This is a rort and a disgrace and needs to be addressed immediately.
Just how on earth is this not the old Commission structure? All those who are saying Financial Planners need to be a profession, now is your chance to convince me we are on the right path. As I see it, these guys are still allowed to use the old commission structure and provide "Personal Advice", which is conflicted and paid for by the product provider, a fee that is not disclosed and charged on an ongoing basis, can not be opted out, and does not require the Advice to be delivered.
Having been down the path of banning Commissions (having been termed conflicted remuneration) and then going back and banning Grandfathered Commissions, how is Intra Fund Advice and associated Fees any different?
Dante and Ben Marshan from FPA - now is your chance.
Totally agree Steve.
LOL. These conversations are hilarious. $1.27M to provide on demand tightly scoped conversations about a super investment with 200,000 people. Go for it - put in a quote. Any fund member that wants any other financial advice pays about the same as clients pay their local financial planning practice
So why not bill the members who use intrafund advice separately? I would like to know the average cost per intrafund advice transaction and how many members actually used the service.
Missed the point Jim.
Members are paying for something they aren't receiving.
Members who don't access the advice are subsidisng those who do.
The member who is engaged and interested in their superannuation account is being subsidised by a member who doesn't particularly care, is not interested and does not wish to access advice.
This is very often the younger members who see superannuation as a very very distant image and is not relevant to their current world and so therefore it is likely the younger members are subsidising the older members who may access advice.
The younger members account balances would naturally be less, therefore as a percentage of their account balance, they are paying relatively more than an older member and they most likely are not accessing advice at all or as often.
Exactly what happened to fee for service, I don’t have an issue with their being advisors at super funds but if you get advice you and you alone need to pay for it, why should other members be paying for your advice this is totally ridiculous and they are hiding that fee in the admin fee what other fees are hidden in the admin fee completely unacceptable, This adds more credibility to setting up your own SMSF I know I will be when my balance reaches about $300,000
Members pay for a lot of things they aren't necessarily receiving. The pay for the cost of development and update of fund websites, apps and online access to their account, but may never use them. They pay for PDS's, Annual Reports and newsletters to be created and published, but may never read them. They pay if legal advice is required for a matter, even if they weren't responsible for the legal opinion being sought. They pay for webinars, presentations and annual member meetings, even if they don't attend them. They pay for the call centre, even if they never call.
Do you want them to be able to opt out of paying for all these things? How about if you're a bank customer? You pay for access to a lot of the same things as above. Should everyone be able to opt out of paying for these from their bank?
Missed the point Jim.
Members are paying for something they aren't receiving.
Members who don't access the advice are subsidisng those who do.
The member who is engaged and interested in their superannuation account is being subsidised by a member who doesn't particularly care, is not interested and does not wish to access advice.
This is very often the younger members who see superannuation as a very very distant image and is not relevant to their current world and so therefore it is likely the younger members are subsidising the older members who may access advice.
The younger members account balances would naturally be less, therefore as a percentage of their account balance, they are paying relatively more than an older member and they most likely are not accessing advice at all or as often.
Jim, you might find this funny but IF you sent the quote to the members that DO NOT use the service would they agree to pay? Seems to me your saying it is fine to send MY financial planning bill to all the other members and this is hilarious?
You OK with it?
Its a big club and we ain't part of it.
I am sick of being treated like a second class citizen and discriminated against.
No hope of this changing soon now Scotty from Marketing is sharing his doona with the Unions.
I feel discriminated against. I feel let down and i feel no-one cares.
I am one of those businesses that fall between the cracks.
I am a one man self employed financial planner working my guts out.
I am not going to change an election with my one vote.
I have no say in Canberra either by myself or by my associations.
I don't contribute to a political party.
I am a grape withering on the vine under the hot scorching sun of ASIC, Regulation and Legislation, Compliance, Codes of Ethics and fees.
I must say i am close to falling off and going back to dust.
Whats that noise????? .......the sound of silence from everyone who cares
Chin up mate. Your family, friends and fellow advisers care; all the ancillary workers whose jobs depend on us care; and most importantly, your clients care. All together, there are millions of Australians who care. I have personally been critical of the exam extension, because I think there are greater priorities. But the positive of the extension, is that it shows the politicians have finally woken up to the massive exodus underway. Kicking the can down the road another 12 months will not make it go away, since the numbers attempting the exam show 60%+ are walking away. If they want to entice some of these advisers to remain in the profession, there will need to be very significant changes. The pendulum is starting to swing back the other way, just as it did in the UK. So hang in there mate.
I will not say that everyone cares, but I will say that most fair and reasonable people do care.
There are a lot of people in positions of power who want to shred the financial planning industry, and your and my job is to stick it to them by hanging in there, and just getting the job done. Shove your middle finger in their face, love your clients and follow where our nose-ring is being pulled. Give it a year or two, and there won't be much of an industry left to pillory. Our obligations and compliance regime is startlingly obsessive. Get on top of it, and then start throwing rocks at all the fools and populists and ideologues that continually caricature us and our legacy.
I am fortunate to be in a decades-long partnership, and that camaraderie has helped me stay sane (just). Reach out to people you love, and they will help you get through this pile of foolishness that parades as a move to professionalism. Professionalism is the target, for sure, but the path towards it was purposefully set up to be a cheese grater.
Too many advisers have been forced into mental anguish and torture. I have seen people attempt to take their own lives, out of sheer frustration. Please don't join them. Look after yourself, and find people to talk to every time the going gets difficult.
You are right Michael.
The number of advisers that are struggling significantly with mental health challenges due to the relentless decade long persecution is overwhelming and yet, as many of them continue to suffer in silence, usually in an attempt to protect those
around them they love and care for, the real numbers of sufferers will never be known.
The vast majority of advisers care deeply about their clients well being, often before their own, but those in power would never have even contemplated the level of empathy and care I have experienced through meeting with many over a 30 year career.
It is a case of persisting to break those who are still here and starting again with a clean slate.
I have no doubt at all this has been a systematic culling process through continual application of pressure, demands and fear.
It has also been about the dismantling of self esteem, self confidence and unfortunately self worth.
There are so many lonely advisers who push on every day, but who feel like breaking.
In the end, the intention of change was to protect the consumer and provide an enhanced outcome.
Whilst this objective is necessary, the misguided manner in which the process has been implemented has resulted in wounded and damaged people who are lost.
There can only be so much pressure applied until things break and we are now witnessing the results.
Why the sudden interest in this?? Intra-fund legislation has been around since 2013. Further, what business is it robbing from the rest of the advice industry? If the industry had a compelling offering for individuals with basic advice needs, then fair game, its not fair. Since commissions were abolished, the industry's response has been to focus predominantly on higher net worth clients so we can keep doing the same thing we did before, but charge a flat fee instead of a % based fee. This isn't innovation, its the sort of thing that results in severe disruption in other industries.
Stop whinging about why we are being hard done by and apportioning blaming all the external forces, and instead focus on the things you can control. Business models/service models have shown to be outdated and need to be rethought, the government wont save our industry, we need to take responsibility. Having worked on both the retail and super sides of the industry, I can say the same challenges exist. Traditional advice models don't scale, and are not profitable. Further, the client experience is at best passable, but no where near what a consumer experiences in other transactions they undertake.
The us vs them battle will only see us all out of a job at some point, its time for solidarity and to use the communities we have available to fight the right causes (technology innovation, service design, pragmatic compliance) as opposed to the ones which will never be won.
Take as much conflicted commission from the members account as required to cover your costs within your fund - no problem, just give basic advice and apparently your good as gold.
If you are wondering what the sudden interest is, it is you realising there is interest. It is a commission payment to conflicted staff to deliver conflicted product advice, via a fee that requires no service, can not be opted out of, can not be altered but must be paid because the product manufacturer can not deliver unconflicted advice and bill the client.
If the service or advice or no service and no advice is so valuable, just bill the client for it when they require a service and stop taking money from peoples retirement capital. You are taking peoples money, delivering nothing for it to many thousands of people and trying to justify it.
If commissions are not ethically acceptable, then Intra Fund Fees are clearly not. At least with Commission you could choose another adviser.
Wondering I think you would benefit from seeing first hand what you think you are missing out on. Providing investment choice and contributions advice to people with small/modest balances. Show me an advice business who wants this type of clientele. Intrafund was created because these needs were otherwise ignored by the advice industry, and super funds needed a mechanism to answer basic questions being asked of their call centres. There is definitely a need to keep this in check, full financial planning should not be provided under the intra-fund charging rules. Most funds solve for this by having separate financial planning teams, providing retirement advice on a fee for service basis. The days of industry fund vs retail are over, the fact is there are more ex retail people in superannuation advice than ever before. So sorry to say this but the evil plot against the advice industry is no longer, rather we are all faced withe the same challenge, how to make advice affordable and relevant to the average Australian forgotten in the face to High Net Worth post royal commission. Every week there is another article boasting how an advice practice has solved its profitability issue but dropping their unprofitable clients. How inventive is that? Also some advice firms merely went from product commissions to selling SMAs/IMAs with inbuilt 'product fees'. With almost 50% of Australians claiming they require some form of financial advice, the market is huge. We should instead stop fighting among ourselves and spend that precious energy writing a new future of our industry.
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