Planning industry united in criticism of intra-fund advice

The formula used by the Federal Government to allow superannuation funds to provide financial advice to members has acted as a catalyst for a common response from Australia’s key financial planning groups — the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA).

The FPA and the AFA, which have recently disagreed on key issues such as the future of commissions-based advice, have emerged united in their criticism of the Government’s approach to so-called intra-fund advice.

While FPA chief executive Jo-Anne Bloch warned that the arrangements could give rise to mis-selling, the chief executive of the AFA, Richard Klipin, warned that it could give rise to an undesirable two-tier advice regime.

Bloch warned that the Government’s arrangements threatened to put the superannuation savings of millions of Australians at risk.

“There are 16,000 financial planners who are ready, willing and able to provide low-cost advice to super fund members, yet the Minister for Financial Services, Superannuation and Corporations Law and the Minister for Finance and Deregulation have chosen to support a free kick to trustees who are not well equipped to deliver individual financial advice to superannuation members,” she said.

“We simply cannot understand why trustees are able to now provide advice without a reasonable basis, and therefore escape criminal sanction, simply because the advice relates to a few scenarios within a superannuation fund,” Bloch said.

“We fear that millions of super fund members will get short-term advice to encourage them to stay where they are. When the markets turn or their circumstances change, no-one will be there to adjust or update the advice and there will be no recourse.”

The strong resistance of the financial planning industry groups has placed them at clear-cut odds with the Association of Superannuation Funds of Australia (ASFA) and the Investment and Financial Services Association (IFSA), both of which welcomed the Government's announcement.

The Government had earlier been criticised for allowing consultations around the intra-fund advice issue to be subject to binding confidentiality arrangements — prompting some industry figures to argue that key changes to advice arrangements would not be subject to sufficient public discussion and debate.

They now suggest the fact the Government has opted to use regulatory measures rather than legislation to introduce the changes means it will now not be adequately debated in the Parliament.