Super funds heavily reliant on general advice

4 December 2019

General advice dominates what superannuation funds are providing to their members, according to the Australian Securities and Investments Commission’s (ASIC’s) review of financial advice provided by superannuation funds.

The methodology utilised by ASIC to survey the superannuation funds has revealed a lot about what the regulator found but also about the intentions of the superannuation funds as they move further into the advice space, with a heavy focus on robo-advice.

The ASIC methodology found that across all funds, general advice made up 75% of advice accessed by members and that the most popular advice topics sought by members were member investment choice, contributions and retirement planning.

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It also found that across all funds that offer advice services to members, the most common delivery channels for providing advice to members were in-house call centres (37%) and advice providers employed by a related party (26%).

ASIC also noted that, across all funds, the key identified conflicts of interest were vertical integration, relationships with third-party advice providers, and bonuses paid to advice providers.

It also found that 61% of funds intended to increase their use of member self-directed digital advice that can generate Statements of Advice (SOAs).

Looking at advice delivery, the ASIC research also revealed that:

  • 49% of general advice was provided by in-house call centres;
  • 30% of intra-fund advice was provided by member-directed digital advice tools that generate SOAs; and
  • 72% of comprehensive advice was provided by advice providers employed by a related party.

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Well, Professional Advisers have to be licensed to provide General Advice so it's hardly a level playing field for them compared with the ISA is it? I wonder if just standards 5 (understanding the advice) and 7 (consent to fees), let alone Standard 3 (COI), of the Code would be satisfied by an Industry Fund giving advice and charging fees to all regardless. Surely at some point, having smashed bank vertical integration, and probably quite rightly, someone understands that ISA is using just that model but doing so even more assiduously.

Why would anyone want to provide full advice when ISA staff is allowed to do exactly what advisers under full advice do but with no training, compliance, ongoing education, university degrees, PI insurance, audits and MOST IMPORTANTLY - No need to act in the client's best interests.

Pretty sure you just made that up. Personal advice is personal advice. Look up ASIC's Report 639 and you will see that there is a need for best interests regardless of retail, industry, corporate or non-aligned advisers.

SB, I believe Anon is referring to General Advice not requiring BID etc.

Suggest you take a look at ASIC's RG 244. Particularly the section headlined "General advice is not personal advice". It comes straight after the section headlined "Licensing exemption for financial product issuers" (The licensing exemption only applies to general advice).

All licensed advisers must comply with the best interests duty when providing personal advice, regardless of employer. (As per report 639). However product issuers (particularly union funds) game the system by providing personal advice under the cloak of general advice, and delivering it via employees who don't have to be licensed thanks to the financial product issuer exemption. It enables them to circumvent a range of consumer protections including the best interests duty.

That's correct, and a very effective way of simply selling a product prioritizes over the interests of the retail client who has little protection.

So as a licensed adviser , I cannot provide general advice that does not incorporate BID obligations because I am not a financial product issuer or an employee of one , but an employed adviser of an industry or retail super fund can provide personal advice under the guise of general advice and not have to abide by BID obligations ?
Just confirming if my take on this is correct ?
If it is correct, then quite obviously it is entirely biased, unbalanced and discriminatory.(as we have known for years)
So, the best way forward is to become an employed adviser of a product issuer and be able to provide personal advice under the guise of general advice and avoid the incredible risk of any form of advice provision currently applied to IFA's ?
The conflict and imbalance within the provision of financial services is so conflicted, manipulated and corrupted.

I believe you are correct. The other advantage of being an "employed" Adviser or phone operator is, you employer can charge every member a fee to pay your salary, the member can not opt out of the fee, the fee does not have any obligation to deliver the service and the best advantage, your employer can direct you to sell the in house product rather than having a Licensed Financial Planner researching alternatives. And NO CONFLICTS.

If you wanted to sell product, which method would you use?

Mostly correct. Licensed advisers can provide general advice without BID. General advice is advice that is not intended for a specific individual and doesn't take their specific circumstances into account. To meet BID you have to make reasonable enquiries about the client's circumstances. So general advice and BID are mutually exclusive. BID only applies to personal advice.

Where the union funds are rorting the system is providing advice to clients who have disclosed their personal circumstances, and those clients perceive they are receiving advice specific to their situation. The union funds are clearly providing personal advice to these people but are calling it "general advice". This allows them to both avoid BID and deliver personal advice via unlicensed call centre reps and "workplace representatives".

You could try becoming an employed adviser of a product issuer, but if that product issuer wasn't a union fund I suspect the law that prevents giving personal advice under the guise of general advice would actually be enforced against you.

It's not the law that's biased, it's the selective enforcement of it to give union funds immunity. There are laws against misleading and deceptive advertising too, but union funds have been given immunity from that for about 20 years.

Im a full service fainacial adviser, however since the government decided to impose all these new costs/compliance and cut our revenue, i have changed my advice structure. Now almost everything is done through general advice. I offer full advice to each client but cost it so that they dont choose to get full advice. The clients end up with exactly the same outcome under GA and under full advice and it costs them the same as it always did however now i dont have to do a full fact find, a SOA or act in the clients best interests. Whilst im self employed and my clients are important to me and i wouldnt ever take advantage of them, i can see that this way of doing business is ripe for dodgy advisers (and employed advisers who have no loyalty to their clients) to take advantage of clients who are offered no protection under general advice.

However, Anon is right. Why would anyone ever want to do anything under Full Advice when eactly the same outcome can be achieved under general advice.

With high net worth clients i still offer full advice however for all insurances and simple super advice (including SMSF) i only offer GA. If BT can get away with it and the ISA can get away with it why shouldnt we. Us self employed advisers are the only ones who ever had tour clients' best interests in mind in the first place, and i find it amazing that bankers, Mortgage Brokers and Property Sellers dont also have to adhere to the BID

Can you only be paid via invoice for this? can you still help them with the application once they decide to pick an option from options given to them?

No, GA is exactly the same as full advice except no Fact Find, SOA or Best Interests Duty. There is no reason to give full advice when everyone else can recommend anythig they want under GA.

You can be paid via the product issuer exactly as yu currently are. Under GA everything is exactly the same. Same process and everything, except you just cannot scan and save the full fact find as you arent allowed to know your client, then your advice is presented as an option, not as a recommendation, but as a series oc options which the client choses from then you implement everything, exactly as you curently do.

What... even for super advice?? eg GA advice fee paid via product WOW is that even legal? I guess this is what the industry funds are doing, investment switches with under GA which I would think should be a big no no

how could investment choice alone possibly be considered general advice? It is likely the largest determinant of outcome. So, I've spent 4 years studying a Masters in App Finance, but should have scrapped that and just gone to an ISA fund to give investment advice.

49% of general advice was provided by in-house call centres; isn't this the same stuff they just give out huge fines to the banks for letting banking staff sell super funds under general advice.....

Maybe "Robo-Advice" should be renamed Row-Boat know, when you're up shit creek without a paddle.

Nothing to see here ...move on.

Ben Marshan made an interesting comment in an FPA webinar yesterday, suggesting that ASIC would soon be getting rid of general advice. If this is true it seems remarkably sensible for ASIC, and likely to alienate groups that have traditionally benefited from ASIC's selective approach.

From a consumer perspective there is no difference between "personal advice" and "general advice". To consumers it's all just advice. They take no notice of the general advice warning, it's just legalistic gobbledegook to them. Consequently "general advice" has been widely misused to sell product & services. Most commonly by union funds and accountants.

Let's hope Ben was right and "general advice" is soon scrapped.

Yes, I discussed that with him too. Maybe light on the horizon.

Hey Anon you used ASIC and sensible in the same sentence. I like that.

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