Super fund comprehensive advice costed at $2.33 per member

1 May 2020

Continued probing by the House of Representatives Economics Committee has revealed more about how superannuation funds are funding financial advice services and what it is costing members. 

Queensland-based industry fund, InTrust is the latest fund to provide details of its financial planning arrangements being delivered by two financial planners and costing a total of $317,054 in 2019. 

But, most importantly, the InTrust response to questions on notice from the committee chair, Tim Wilson, has revealed the comparative cost of comprehensive advice and intrafund advice. 

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And, in similar terms to earlier questioning of industry funds, InTrust has calculated that the average cost to members was $2.64 per member. 

The InTrust response also revealed the degree to which its advisers received bonuses for their efforts with the average in 2018 being $9,596. 

Wilson asked InTrust to detail for each year of the past decade, the cost of comprehensive advice annually, and the average per fund member as well as asking what was the aggregate value of bonuses provided for comprehensive advice, and what the average per adviser. 

InTrust provided the following table: 




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What they really should be getting into the data is a split out of the number of comprehensive advice jobs done and the average cost of those which would be specific to the member who signed up to the comprehensive advice.

My thoughts exactly. And why is the total membership being charged for advice received by the few. Again, fee for no advice. Doesn't matter that its "only" $2 or so a year for each member.

Unfortunately it is classified as intra-fund advice. Industry Funds are within their rights to charge the fee. Not a level playing field and creates "an unfair legislative environment that favours one group of financial advisers over others." See earlier article by @Mike Taylor https://www.moneymanagement.com.au/news/financial-planning/intra-fund-ad...

More spin by the industry funds, makes me sick to the stomach. If the advisers saw 200 clients between them and gave the comprehensive advice on 2019 numbers cost of advice is $1,042 per client. To spin it as $2.33 per member should be seen for what it is, spin doctoring at its finest.

I thought comprehensive advice was not able to be paid by the fund at all. It was excluded by the law.... Help anyone?

$2.33 per member based on the total number of members in the fund !
If only 2% of members accessed advice then what is the cost per member then ?
This is a ridiculous exercise.

What is the point of all this?

The cost of comprehensive advice is virtually the same, regardless of who delivers it. That cost is wildly higher than the average Australian thinks or is prepared to pay. Look across the large super funds and you'll see it's the same. UniSuper, AustralianSuper, Public Service Super et al. The costs range from $2,200 to $6,000 for comprehensive advice. It's the same price as that charged by every other financial planner out there.

So the real point is that the cost of advice is simply too high.

It doesn't matter who is delivering the comprehensive advice. All advisers face the same issues. This retail/industry super foolishness should have stopped years ago.

Advice is about more than just superannuation. Yet the super pools of money have become so big that the vested interests keep wanting the focus kept on their particular lobby group. The average adviser voice is silent in this loud and noisy battle of giants.

We don't need more surveys to prove this or that is better. What we need, are evidence-based, advice-client centric measures and benchmarks, with legislators and lobby groups aiming to bring regulations and compliance outcomes into line with those client expectations.

If we took a population data set of all humans, we'd find that the average person would have both a penis and a vagina.

The denominator in the equation for this average is wrong. It should ONLY be the persons that have received advice, not the total population data set of the fund.

What would be great is if the author of this article invited a competent representation to comment on the report.

Exactly. Reading between the lines, what really happened is about 100 members received advice costing about $3,000 to provide, for $2.33. And about 120,000 members paid $2.33 fee for no service.

Intrafund advice is a fee for no service scam identical in principle to those highlighted at the Royal Commission. Except it is thousands of times bigger. Why is the media so silent about this scandal?

They have a novel way of paying themselves - do a little bit of work (will have to take feet of table for a bit) to retain those members which require some advice, and then just charge the all those that receive no advice? It's only a few dollars from everyone so and they probably didn't notice so I guess the Trustee sleeps easy? Amazing ethics.

The true cost of the advice is .... number of client who ACTUALLY received advice dividend by the total cost.

When ASIC request a FFNS lookback audit on this fund they will end up paying back 120,000 members $2.33 each for a total of $279,600 for that year, plus earnings. Plus they will need to write them a letter explaining it for another $100k.
Or they can pay $400 per client to audit them to prove FFS.
How will this fund pay the members that didn't receive advice back? Who will end up paying it?
Can someone actually ask ASIC / the media why this isn't addressed? It's all well us discussing this here, but it's time to educate.

Answer for planners is simple - just get a couple thousand clients, only do work for those who ask for a plan and yet charge everyone a small annual amount... oh wait, that's right, this approach for planners was banned and yet it is allowed to live on for the ASIC protected species called industry (or union controlled) super!

Correct.
Intra Fund advice fees for every single member is a retainer fee charged to all in order to access advice if and when they need it.
Corporate Super was no different in that the adviser was appointed by the employer to provide advice, service, member education and employer plan policy committee representation and were remunerated on the total plan assets or on a fixed fee basis.
The adviser was available to all members of a plan at any time to provide personal or ad hoc advice and assistance and the members had a contact point and access to personal service to assist them when needed.
Then the Govt introduced MySuper in a bid to destroy this model and cut the adviser out of remuneration for looking after the needs of plan members. This was a deliberate and planned assault to control employer superannuation.
Now, the ASIC is planning to ban the ability of a member to pay for advice from their MySuper fund !!
So the Govt changed the members investment options to MySuper options without authorisation from a member and now ASIC want to ban a member from having a choice to be able to pay for advice from their own super fund .
In the interim, Industry Funds are still permitted to charge every single member a " retainer " fee for access to general advice.
And with ASIC having appointed Australian Super as their employer default fund, they are exposing their own employees who elect this option to the very same process. This would therefore have to indicate that ASIC approve and support of this model.
How is this possible ?
This is unacceptable and a clear indication there is significant imbalance in the regulations and how they are applied and regulated.

The sad reality is that the regulatory approach to planning has been putative for quite some time. The Industry Funds are simply trying to address issues that mutual funds had to address generations ago. Mutual funds came up with commissions. Industry Funds are calling it something different, but it really is the same thing.

It's actually not a bad idea, a point underlined by the Industry Funds resorting to its use.

The problem was the ethical component of informed, prior consent. Although that consent may have been informed and prior, it may also not have been. A simple fix would have been to mandate that every account with commission has a note included with every correspondence to remind people that there is a fee being charged, and that they are free to turn off that fee at any time - at which stage, they will need to pay for any access or service directly. Had that been done a decade or two ago, none of this foolishness and vindictiveness need have occurred. As it was, the Industry Fund lobby group was able to use the uncertainty created as a wedge to better combat the perceived competition from advisers in the open market.

The reality is that super dollars belong to the member. The member is able to direct how they are spent, within the confines of SIS and regulatory guidelines. I quite like the idea of no fees from MySuper. No adviser fees, no advice fees. If you want those services then you should switch your account to one that caters for such payments.

And how much of this advice recommended to retain funds within the existing super fund the adviser work for?
I would be interested to see that, and how it adheres to Best Interests and Code of Ethics.
Ethics by itself would state the member receiving the advice pays the full advice fee, not for it to be spread over thousands of other members.

And why have these questions not been investigated by ASIC?

the smart operators high up in the union funds have known exactly what they were doing in funding their inhouse marketing reps via the intra-fund advice regime, as Labor put in place at the same time they put FOFA in to shaft their competitor advisers. They then convinced the taxpayer to burn $100 million on the Haynes RC to further shaft their competition. This is one of the biggest fraudulent scandals to ever hit an industry. Intrafund fees must be brought into line with all other advice provisions, as this has now evolved into a shockingly bad industrial relations issue now - that cannot be sustained long term.

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