Super funds ‘terrified’ of giving advice

The prospect of giving advice is "terrifying" for superannuation funds and greater clarity is needed to ensure super funds can fill the gap outside of comprehensive advice, according to a panel.

Speaking on a panel at the Household Capital Three Pillars Forum, asked by moderator Ali Moore if super funds were scared of giving anything that looked too much like advice, Ben Hillier, AMP general manager retirement solutions, said “of course” they were.

“There's been some high-profile cases where super funds have been wrapped over the knuckles for perhaps, for giving perhaps personal advice or what's been called personal advice when their intention was to make it more general,” Hillier said.

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“Simply because they perhaps knew more about the client and perhaps the client may have had an expectation, or there's a possibility that the client had the expectation that personal information was taken into account.

“It really does terrify funds, and so we do see a lot of funds sitting on their hands doing quite limited, or certainly providing less, advice than they legally can provide.

“We do need greater clarity in the regulatory space to ensure that super funds can fill the gap between comprehensive advice, which absolutely should sit outside of super funds in most instances.”

Hillier said there was a “big gap” for people who just could not afford that type of advice or did not have complex needs.

“Just on a single topic, scaled advice as we call it, perhaps there's a different name for it, but I think, the regulatory support to narrow that scope and to provide the guidance that people are clamouring for,” Hillier said.

Jeremy Duffield, SuperEd and Retirement Essentials executive chair, said the “elephant in the room” in the Retirement Income Covenant paper was the failure to address advice which had been deferred to the Australian Securities Investment Commission (ASIC) review next year.

“That really is the big question: how are super funds going to provide advice?” Duffield said.

“The current regulations make it very difficult to know what the boundaries are and to provide an affordable form of advice in a safe harbour environment for super funds.”

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Advisers are cautious about scaled advice as well. We can make it affordable but ASIC’s relentless pursuit of of advisers puts us off. Super funds are as conflicted as any product manufacturer - I don’t see why they are seen as so holy and being looked to to ‘fill the advice gap’. If policy was clear and reasonable and the wording not so wushu washy to ASIC as much room as it wants to prosecute, if advisers weren’t being ‘encouraged’ out of the profession and operating costs were affordable, perhaps advice could be more affordable.

Agree 100% why are super funds looked at as being advice providers in the first place? As they wanted to flog product and protect fum, first the big banks now the isa has followed. They cant possibly meet best interest duty if scoping out the actual fund itself. These funds are doing exactly the same thing amp et all were doing, using in house staff to keep clients. I see clients with many varied funds, some are aok to stay where they are , we find others though, its in thier best interests to move, maybe for a smsf or maybe just as there are better products for that particular client. No fund advisers will point that out , of course not they wouldnt get the retention target. We keep saying to be a profession you need to seperate product and advice, but now we see a big chunk of the fpa members are fund advisers. So now we that want a level playing field need to fight against them too. What a stuffed up situation.

The High Court decision in Westpac Securities Administration Ltd & Anor v Australian Securities and Investments Commission [2021] HCA 3 on 3 February 2021 was an incredibly important decision in that it communicated loudly and clearly that you can't ignore the law. Financial advisers have long had to provide replacement product tables and appropriate research to show why their recommendation that a client switch from Product A to Product B is in the client's best interests and they need to demonstrate they have met the safe harbour provisions. For a bank-owned issuer to ignore the law is perhaps no surprise but it proves what we all know which is super funds are interested in one thing - growing their funds under administration, and the rules governing personal advice are an annoying barrier to achieving that goal. I think its pretty rich to try to lobby for a carve out from the the full whack of rules governing personal advice (including FASEA) to allow superfunds to play in the scaled advice space and lump advisers with the holistic end of the advice spectrum and subject to the full weight of FASEA. If creating a level playing field where we still have an advice profession, the FASEA code needs to be amended to allow for scaled advice outcomes more easily than it currently does in order to 1) increase access to affordable advice and 2) stop providers trying to wiggle around the edges.

Yes - good thinking

Totally agree!! Don't have to be a genius to read between the lines about the "gap outside of comprehensive advice" comment being basically that super funds don't want to be in a position where members are regularly recommended to exit their fund for any reason as this would not fit with a strategy of trying to grow their super fund membership base. Example, going into a Ford car dealership where all employees are paid by Ford but the customer are being told to buy a Holden instead because it is in the customers best interests!!! That's the "terrifying" part, not actually ASIC which is a convenient smokescreen, and a "scaled advice" legislative carve-out under the pretense of "affordable advice" would simply mean the best interests duty has been killed off by vertically integrated super funds.

Let’s keep it really simple remove the words advice, coach, client service etc. from the conversation and replace Super call centres description as the product promotions team. The sales team can promote their product and simply warn any callers that they are an 'agent', as per the life company description from the 80's, for the super fund and they cannot act in the clients best interests as they are conflicted.
'Advice' is not what the ‘Promotions’ team do - they sell and push product. The answer to 'should I look at a better solution' can then simply be, I am here to sell you my product not discuss any alternatives and it makes my company more money if I promote our in-house investment options as that is the biggest margin for the company.
Problem solved

Because I am bound by certain Fiduciary Obligations, Best Interest Obligations and now FASEA, I've told many people to get advice from from these industry super funds, and or turned people away... but strangely, I've actually never had a single person come to me saying "the call centre adviser recommended I needed "more" and to see a specialist holistic adviser" Yet ring up AwareSuper today and it's three month wait to see an adviser.

Super Fund and watering down legislation is like me going to a Doctor in a Covid pandemic saying I've got a sniffle and a cough, and saying I think I need cough medicine. After being "sold" something I'm then told come back and I'll sell you some more if things get worse. Whilst the wider precautionary, stay at home, testing and further treatment is all ignored. We wonder why so many Australians are on an Age Pension, get scammed, or think BitCOIN will save them.

Let's remember these advisers are being coached, trained and managed and report to people with no skin in the game. Typically it's some middle manager set on making personal targets...ASIC can't ban or fine those middle managers. Let's start there. Did we learn nothing from the Royal Commission? If anything regulation should be increased for these firms.

Ha ha for the busy advisers who haven’t got a subscription or time here is an executive summary for you

Accounting Body Turned a Blind Eye, Edmund Tadros, AFR 20/09/21

1. “The US audit watchdog, the US Public Company Accounting Oversight Board (PCAOB), last week fined the firm $US450,000 ($615,000) over the cheating” which is not an insignificant amount
2. “CA ANZ receives funding from auditing firms such as KPMG and has a KPMG partner on its board

3. “The body is turning a blind eye because they don’t want to offend a big player “

4. “More than 1100 people from all levels of KPMG were involved”

5. “CA ANZ admitted it had yet to investigate or discipline those involved in the misconduct despite being told about the matter 18 months ago”

Doesn’t this sound eerily familiar?

p.s. happy to cast the first stone. Royal Commission into the professional accounting bodies CA anz and CPA both with very loose governance (tongue in cheek)

OMG what a bunch of CRIMS!

KPMG Audit ASIC, they don't mind turning a blind eye.

KPMG were at the center of the Shipton payment issues... they charge personal tax returns at 120k is starting to look like bribe money = Disgraced ASIC boss walks away with $290k - 58 "Cartier watches"

These big accounting firms use lawyers regarding matters then they claim legal privileged making it harder to investigate.

Shipton, a former investment banker with globally notorious financier Goldman Sachs, was replaced today as ASIC chair by corporate lawyer Joe Longo.

Longo was once chief lawyer for Australia’s most infamous financial criminal Alan Bond and more recently has been Deutsche Bank’s general counsel for Britain and Europe, where the bank has repeatedly fallen foul of financial regulators.

Deutsche Bank had a bailout in the GFC yet somehow we now have three ex employees Jane Hume, Josh Frydenberg and Now Joe Longo at the head of all financial rules and regulation and we think we are going to good outcomes for consumers? question one are they going to help financial planning or the banks to give robo advice or more crave outs to super funds to sell to clients directly without all the rules attached.

Superannuation Funds should not be giving advice. The pharmaceutics industry should be the guide. Put warnings on your products, but leave it up to professional advisers to dispense the product. If there are no longer advisers left to write the prescriptions, then Government, Commissioner Hayne and ASIC need to find ways to enable more Advisers. They created this mess, they need to fix it. I'm so glad I left this (expletive deleted) industry.

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