Industry fund reveals paying up to $500,000 a year fee to outsource advice

Yet another major industry superannuation fund has revealed that the per member cost of providing financial advice is around $2 to $2.50 per member.

The latest fund to disclose this cost is MTAA Super which acknowledged that it did not directly employ financial advisers.

Answering questions on notice from the House of Representatives Standing Committee on Economics, the big fund said that it did not employ financial planners.

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“Financial planning is outsourced. The cost of providing this service to members is approximately $400,000 to $500,000 per annum which is approximately $2-$2.50 per member per annum,” it said.

“MTAA Super outsources comprehensive advice activity to Industry Fund Services (IFS), with members able to access advice from qualified planners who are dedicated to MTAA Super members.

“Members pay IFS directly for advice received, with those payments offset against the outsourced service fee,” it said. “To have this service available to members, MTAA Super pays between $400,000 and $500,000 each year.”

The MTAA Super answer said that members were not charged specifically for intrafund/scaled advice and that these costs formed part of the Fund’s operating expenses which were funded from the administration fee to members.

It said that General Advice formed a part of a broad administration activity, including call centre and field staff.

“In addition, publications (product disclosure statements, factsheets), online calculators and workshops/seminars form a part of the general advice offer. As such we are unable to identify the specific costs overall or per member for this activity.”

 




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What this really means is that about 200 members pa are getting financial advice for $2.50. And about 199,800 members are paying fees for no service.

"Industry" funds are AMP run by union officials.

Didn’t we have a royal commission not that long ago? Conflicts everywhere.

The Comrades are laughing all the way to the bank.

interesting concept this is.. everyone pays a small amount to subsidise the few that get advice. I'm pretty sure that that retail funds used to do this before it got banned.

Could anyone imagine a more compromised set of circumstances for the advisers involved? If anything breaches standard 3 of the code of ethics, it is this. The advisers are basically there for preventing outflows. Any good financial is merely incidental

This is what I cannot understand, advice needs to show value for money, needs to be clear and concise disclosure of fees, clients best interest may be to rollover from MTAA to another fund, there is none of this involved here, how are they getting away with this? I asked my dealership can I charge a general advice fee to my clients then give them all free general advice, no I cannot , then why can these planners be paid like this? They are being paid for SERVICE that may or may not be delivered. This is why we have the new code of ethics apparently to stop this fee for no service. Whats the use of working under of the COE when there is a whole cohort of planners not following it? FFS you are either a planner or not, you follow the COE or not, none of this carve outs!

Watch this space...... oh wait industry funds so all will be forgiven or swept away.

Everyone pays a small amount to subsidise the few that get advice. Like we pay tax to cover the social security payments.

Except social security is generally a benefit for those with few assets, paid for by those with far more. Intra fund advice (aka "fees for no service") is generally the opposite.

It's not paying for CentreLink. Would you be happy to pay tax to cover the cost of my Financial Planning?

this sentence gets my attention "with members able to access advice from qualified planners who are dedicated to MTAA Super members."

Mainly around the language used "dedicated to MTAA Super members."

Did I hear retention officers called by another name!

Compare the pair - how does one even attempt to compare the pair when their (MTAA) response is "As such we are unable to identify the specific costs overall or per member for this activity". How can Financial Planners/Advisers compare the pair when MTAA can't even identify their OWN costs? It was a Banking Royal Commission - but they failed to make relevant enquiries regarding - Industry super funds and their little bank ME which appears to be opaque as well.

Hang on, they told me it only costs $1.50 per week. I'm going back to a retail fund now because they don't pay commissions to financial advisers.... I only pay my adviser a fee.

This practice has been outlawed in Employer Super style arrangements since FOFA, unless a clear service is delivered (not just offered) to the member, but this seems to have been overlooked by everyone here, especially the Mr Hayne and his very biased review, who just waived them through with a pat on the aback. All everyone wants is a fair and transparent system, but the Industry Fund sector have never played that way. this crisis has shown them up for everything they really are.

This is interesting.
MTAA claim the Admin Fee is $1.50 per week ($78p.a.) plus 0.15%p.a. of the members account balance up to a total of $528p.a.
They also claim for the 12 months to 30 June, 2019, the funds estimated admin costs were $3.33 per member per week.
This equates to an Admin cost of $173.16 per member per annum at $3.33 per week.
This must be an average cost per member because quite obviously, a member with $300,000 is being charged .15% p.a.($450) plus the $1.50 per week ($78p.a.) to total the maximum Admin Fee of $528p.a whilst a member with only $50,000 account balance is being charged $75p.a plus the $78p.a , totalling $153p.a.
So, is the member with the $300,000 account balance and paying a total admin fee of $528 p.a. and who does not access any advice through the Intra Fund model, subsidising all other members who have significantly lower account balances and who access the Intra Fund advice ??
If the average estimated admin fee is $3.33 per member, per week , what happens to the difference between the average admin cost of $173.16 and the maximum admin cost of $528.00 ??
Of course, the Investment Fee is a separate cost again in addition to the admin fees and so it cant be justified that there is more work in administering a larger account over a smaller account as the investment fees are percentage based and so these would be account volume based.
It appears that whilst the basic admin fee of $1.50 per week per member is straightforward, the additional .15%p.a. of the member account balance is in fact an asset based fee and charged irrespective of whether the member accesses any Intra Fund advice or not.
Not only that, one would have to assume that some members are paying significantly more for the privilege of simply having access to the Intra Fund advice, whilst others may pay significantly less in fees and access Intra Fund advice on a regular basis.
This appears to be an asset based fee retainer without any requirement for the fund to deliver those services to the member but only simply have those services available to them if needed.
This is why this area so desperately needs to be fully and thoroughly investigated.

Any idea of the total $$$ amount taken from members accounts for the provision of said Intra Fund Advice? No one ever seems to know.

That would be like asking what happens at area 51, plenty of speculation but the powers to be will never give that secret out.

yes, undisclosed, just like the ASIC gift register - stinky fish smell anyone?

If an account based grandfathered commission payment of .15%p.a was termed an admin fee and justified as providing access to the adviser at any time throughout the year for advice specific to the super fund, why have these payments been banned whilst these asset based fees charged by Industry Funds, of which a component is costed to provide access to advice are allowed to continue unchallenged ?
The grandfathered commissions were paid on a percentage basis and costed within the product.
These asset based admin fees are percentage based on account balance and are charged against the members account.
Grandfathered commissions could be switched off by a client or a super member upon request.
Asset based Admin Fees can't be switched off by the MTAA member if they request it and because they haven't accessed or received services or advice.

The Intra Fund advice fees paid by members of Industry Funds are retainer fees paid for access.
It is paid for the retention of a right to access it if required.
Why are members of Industry Funds obligated to paying for something they may never access?
Are Financial Advisers able to charge their client a retainer fee purely for the right to access the adviser at any time ?
If a Financial Adviser were to structure a variable or fixed fee which covered all aspects of service and advice for the year, it is expected that would be delivered and received by the client.
However, Industry Fund members are charged a fixed and/or variable asset based fee for the admin and access to advice if required......with the emphasis on "access". If it is not received, the member still pays.
This is because the Industry Super fund model is based on perhaps a socialist type of mentality where the costs are shared by all for the greater good.
Given the union and left wing origins and current influence within these funds, it is understandable their philosophy is to charge all members in order to strengthen their position.
However, there simply cannot be 2 sets of rules governing the oversight of financial advice delivered to superannuation members in this country.
Either you request and agree to advice and pay a fee for that advice or you don't....its as simple as that.
It does not matter whether the advice is termed "simple" or "single issue" advice and covered by the fees levied against all member's account.
Isn't just a matter of user pays and if there is no user, they don't pay ?
Tim Wilson MP needs to continually pursue matters regarding the oversight and regulation regarding Industry Super as it appears sectors of the Govt and the regulator are comfortable in allowing these anomalies to continue.

You do realise that intra fund advice isn't just for industry funds right? Retail funds/public sector/corporate funds can and do provide it too. The way a lot of commentators on here talk about it its as if they think superfunds have to be an industry fund to provide intra fund advice

If advisers cannot get paid for this service why should the super funds be able too? and now with clients without access to face to face service they used to have.

No, what we're railing about is that many planning firms had corporate super as a valuable part of their business, and charged in an identical fashion. This however, was banned (why?) as unethical or fee for no service, and yet that exact model is not only employed, but largely uncosted, monitored or even by the looks of it scrutinised under any internal compliance or oversight at all. And somehow ASIC believe it is alright for predominantly ISA to employ it and a smattering of retail/FSC funds.

ASIC are corrupt, or if not, are doing the damnedest best impression of it through pure bloody-minded ineptitude.

Another Royal Commission pls for industry funds. More and more rubbish coming out each week. Jayne was punching well above his weight in the RC. Shrivelled up man has ruined the whole industry.

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