Planning industry united on MySuper advice fees

The financial planning industry is forming a united front against the Government’s moves to ban the payment of advice fees from MySuper accounts.

Both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) have declared their opposition to the move which stems from the Government’s insistence on rubber-stamping the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The united approach comes against the background of a growing industry consensus that the Royal Commissioner, Kenneth Hayne, had failed to thoroughly understand superannuation-related advice including the status of intrafund advice.

Related News:

The AFA’s formal position is expected to be made clear when it releases its submission to the Government’s proposal later today, but the organisation’s director of policy, Phil Anderson said that the AFA was strongly opposed to the ban on the payment of advice fees from MySuper accounts.

“And our opposition stems from the fact that members holding MySuper accounts are being treated as second-class members,” he said.

“They may want advice around account consolidation, salary sacrificing into super or transition to retirement but, unlike members of choice funds, they will either be denied access to advice or be forced to pay for it themselves,” Anderson said.

He said the alternative would be for them to roll out of the MySuper fund and establish a choice fund – something which could prove costly and not ideal,” he said.

The FPA chief executive, Dante De Gori, yesterday made clear his organisation’s opposition to the MySuper fees issue stating the FPA opposed the move because it would create two classes of superannuation and take away the ability for consumers to choose where they get advice and how they pay for it.

“It is incorrect to say that people with MySuper are disengaged and do not require advice,” De Gori said. “Many people choose to stay in a MySuper investment option because it is the right one for them and they have the same need for financial advice on their superannuation, insurance needs and retirement planning.”

“Stopping the payment of advice fees from MySuper investment options will disadvantage many Australians who currently use this arrangement to access affordable advice from their choice of financial planner.”

Both the FPA and AFA are expected to urge their members to lobby individual members of Parliament to point out the deficits of the MySuper move and the problems it is likely to generate for MySuper members as they move closer to retirement and have a greater need for advice.




Recommended for you

Author

Comments

Comments

In simple terms it will do two things 1. remove access to advice for MySuper members or 2. Increase the cost of advice to MySuper members.
In a business that has lots of new inquiry, they will simply filter the MySuper members out because of the increased cost and time to serve (inevitiable with the reduction of advisers tipped to be between 50% to 70%).
Or the MySuper members who want advice will be charged more to access to access the advice.

What is misunderstood by the regulators and Commissioner Hayne is that the capacity for the average person to p[ay for advice they require is limited. Capacity to pay isn't an issue for most highly paid lawyers, public servants and politicians. So they underestimate it's impact. However the average person is already severely limited in their capacity to pay and access qualified advice which is evidenced by who uses financial advisers. Market Penetration is the top quintile of householders by wealth is 33%, in the bottom 80% it drops to around 4% use.
Any measure that further limits the publics accessibility to advice should be questioned as to the merit and intent.

The capacity to pay is a block for many people with average income, casual work income and gig income. The opportunity cost of financial planning is not seen as a beneficial alternative.

An equally important block is the lack of understanding of the work of an independent financial planner and the value in the pocket arising out of that work. I find this especially so for young people who are starting their employment and see retirement as a distant event.

If people have any views of financial planners then it is likely to be an unfavourable view. Many posters here rail against the Royal Commission but what it exposed was not nice and there's a lot of nefarious deeds not yet unexposed.

People roughly know what a lawyer, a doctor, an accountant, an engineer do and the value and benefit they bring if they are hired or paid. This is not so with financial planners. If people do think of financial planners then it is invariably not nice.

The financial planning industries and its individual planners (and maybe its less than glorious representative bodies) need to run a sophisticated and ongoing education campaign to the Australians who do not engage with the planning industry. This campaign needs to educate what planners do, how they work and what value (especially in amenity terms) they give to individuals. When people engage a financial planner, then they realise the value of a planner. But it is getting people across the doorstep that is needed and needed urgently.

Recently I have attended orientation weeks at a couple of universities. All the professions were on show to the new undergraduates - except for the financial planning profession.

Why would universities bother to spruik for new financial planning students? They will have more than enough delivered to them on a plate over the next few years thanks to the conflicted FASEA Board.

Just to correct your impression of my suggestion. I am suggesting that the financial planning profession does the spruiking to promote the profession and its value to helping people through their lives. This is what the other professions do during O week. The profession has a lot of ground to recover from a number of inquiries.

The Federal Government does not see that it owes the financial planning industry any favours as it sees the industry left it high and dry as the bad behaviours have be illuminated. The Government knows there's more to come despite sports rorts taking the heat away from the industry for the moment.

As for the people leaving the industry/profession, let them leave. But we need people coming into the profession and that won't happen if the profession does not walk its talk. Defeatist if it doesn't.

BTW most people are passing the exam.

Hedware, I believe I understand what your message is. I do agree that our Industry bodies such as the FPA have seriously let the industry down however, the Liberal Government and the consumer in the end will be the ultimate loser I suspect. I will keep going, either as a self employed Adviser or I'll be a directly employed Adviser selling product for a product provider - and getting paid from Intra Fund Advice Fees - no longer is commission allowed.
Just had a prospective client call today. Have seen her last year but I declined to take her on. She wanted advice but was not willing to pay for it at the time. Previously I would have been more than willing to help her and charge around $2,200 for the SoA and then recover the costs over the longer term with a smallish (even $1,500 pa ongoing fee and I would have been happy to help her year in year out with all her questions and advice requirements.
She went with HESTA and guess what, I appears they helped her make a nice big bring forward Non Concessional Contribution (she had recently sold her home) and left her there in Accumulation even though she is now over preservation etc. It appears HESTA has essentially increased FUM and is getting Intra Fund Advice Fees to help. She is now feeling unsettled and she is still renting and wants to buy a home and the market has dropped and she was not aware that this would affect her Superannuation balance - yes, she is in the famous HESTA BALANCED option.
Probably a good client in the makings - she is almost ready to pay me anything to help her and I probably will but it will cost - I have to cover the cost of my time and meetings, research, BID, SOA and implementation, including Centrelink etc. She has had many people tell her she would qualify for CentreLink - all she needs to do is most of her money to buy an expensive home.
If I don't help her, she might take the expensive home option - good for the Government as they get to pay her Age Pension.
If I don't help her, she will likely stay in HESTA and the Unions will have greater power over the markets, particularly as they are fast becoming the biggest aligned investor investor group. They likely will not in the end be supportive of Liberal Policies in the future. Labor will likely have plenty of funding for elections and Liberals, well, I won't be voting for them nor will many of my clients who previously I suspect would have so the Libs might be able to get votes from the Banks, that's right, money. But I suspect the Banks will always have an eye for the future and will be supportive of whoever is in their favor.
The end result I suspect is many ordinary people will no longer be able to receive advice within their budget so will end up receiving advice from the product providers in the most part - and come to us to sort out the mistakes. Not interested in these people really - but it does appear that life could be good as ordinary people are going to get themselves sold products from TV and Product Providers and find themselves . These problem could have been avoided but what I believe is conflicted advice from product providers under the cover of Intra Fund Advice not helping Advisers(as our Industry has Advisers working for Product Providers), nor is it helping many clients, but it does seem to come in very handy if you are in the market to sell product - so the problems will I suspect continue.
If the Government at some later stage wants unconflicted Advice at a reasonable cost, get product providers out of advice and then get the government to foot part of the cost - much like legal aid and Medicare. I'm no longer bothered either way.
The regulators, don't get me started. First step, make them all redundant and employ qualified personnel, not Lawyers making the rules for Advisers.
The Libs have solved nothing nor do I see their (Treasury's ideas I suspect) proposed legislation solving anything. Product Providers will still be in charge and still able to sell product under Intra Fund Advice, all paid for by all members and this advice provided to a few. Why this is not fee for no service is beyond me and I can't change that.
I see a future where prospective clients are more desperate for Non Product related advice, and I will help those that are willing to pay my fees (to cover the costs) but with far fewer clients. I'm no longer in the market for "Mum and Dad" so I guess I am defeatist - perhaps.

More proof that FPA has been taken over by Union Super fund advisers on the intra-fund drip. Their Treasury submission makes this abundantly clear. Time to cancel your FPA membership, as they are doing you over.

but that's because its getting too hard to get paid as an adviser, so there are few jobs available. Simply insane govt policy.

can someone just explain the logic of this actual RC recommendation? It just goes to show that the blind seem to be leading the blind.

The FPA submission makes it abundantly clear that the FPA has been taken over by a large number of Union Super Fund advisers, quite happy to collect salaries from Intra-Fund advice marketing fees - with no reference to fund members providing informed consent or any opt in for those on-going intra-fund salaries they are collecting.
So by default, they are are desire to maintain a two tier super fund advice market. It's a scam against non-intrafund advisers, totally at odds of the whole concept of informed consent clearly outlined in the Hayne RC recommendations.

Looks that way.

Add new comment