Opportunity to align super and advice

There is an opportunity for alignment between superannuation and financial advice but not until the industry is truly independent, according to minister for superannuation, financial services and the digital economy, Jane Hume.

During Industry Super Australia’s ‘Brighter Future for Members’ webinar, Hume was asked whether super funds could provide free financial advice to members through salaried employees.

Hume said the advice sector had seen significant reforms over the last decade and would continue to do so.

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“It’s essentially moved from a sales industry to a profession and that’s been a very uncomfortable journey for an awful lot of those that are within the industry, but it’s been an important one,” Hume said.

“I think now there is great opportunity to see far better alignment between superannuation [and the advice sector], particularly once we get to that deaccumulation phase, but the advice sector still has a few ways to go.”

Also answering the question, Labor’s shadow assistant treasurer, Stephen Jones said he was “intensely uncomfortable” with the model suggested in the framing of the question.

“I’m not going to rule it out but I’m intensely uncomfortable with the model that had been suggested [by the question],” said Jones.

“The Hayne Royal Commission showed all of the conflicts that exists through vertical integrated organisations where the adviser is attached to the fund… therefore the momentum and incentive of value capture is immense.

“And I think it would be naïve to think that that is only a problem in the retail sector, and it wouldn’t, if we extended that right throughout the industry, be a problem in the industry sector.”

Replying to Jones, Hume said she was well-aligned with him on financial advice being a highly independent profession.

“It’s taken a long time to bring them here, let’s not lose it now,” Hume said.

Jones said it was just as important to get the advice component of super regulation right as it was to get the Retirement Income Covenant and decumulation right.

“The advice sector is in turmoil, the old business model is stuffed, the new business model hasn’t been created yet,” he said.




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“The advice sector is in turmoil, the old business model is stuffed, the new business model hasn’t been created yet”.

This must be the quote of 2021! Hats off to Stephen Jones. He clearly understands what's going on far better than the incompetent Hume. It's also good to hear him express reservations about intra fund advice, even from Labor aligned "Industry" funds.

In terms of creating the "new business model" the way forward is fairly clear. Fix the mistakes of FASEA such as the unworkable Standard 3 and insufficient recognition for prior learning. Remove financial advice from the Corps Act and create a separate, simplified, legal instrument. Simplify advice regulation with a genuine SINGLE disciplinary body, which by definition would involve removing ASIC, AFCA, Austrac and licensees from financial adviser regulation.

The "new business model" is definitely not Hume's preferred options of "Roboadvice" and Tik Tok. They would result in even bigger conflicts and unprofessionalism than the bad old days of financial advice.

The very same politician idiots that legally allow Industry Super to charge $$$$$$millions & millions of HIDDEN COMMISSIONS to every member of Industry Super Funds when the majority of members don’t get any Advice, from the vertically owned ISA Sales Advisers.
It’s amazingly clear they have zero understanding of their jobs over seeing Superannuation & Advice.
Absolutely dumbfounded, FFS they are utterly clueless with no idea to fix the mess.

how can you provide free financial advice from salaried employees? Someone has to pay the employees, the fees to pay that must be funnelled to pay the employees. And we all know that with incentives etc you are still going to get conflicted advice.

Mr Jones better be careful what he says. Everyone know the biggest vertically integrated organisation around is his mates/employers at the union funds. I assume what he really wants is to ban vertical integration for everyone except the union funds.

It's great that Stephen Jones has identified that the industry Fund advice model is vertically integrated, but being "uncomfortable" with it is a long way from ruling it out...

It's unbelievable that Jane Hume could be so naive to think that the suggestion is a reasonable option, when the legislation is attempting to change the industry from a sales based occupation to a profession.

"The advice sector... new business model hasn't been created yet"... because:

1. We've had 40 years of industry super advertising which has solely served to denigrate the personal advice sector, so much so that the whole of Australia believes the rhetoric, (even Jane Hume).

2. There is so much over-regulation in the IFA space, it is now impossible to provide simple advice to all Australians.

The simple solution should be that:

1. Industry Super employees should only be there for Admin and transactional purposes (ie... no advisers), and any client remotely requiring advice should be referred to the ASIC FAR register. IFA's should be able to provide an ROA for any referral coming from the industry sector, excepting for maybe rollover advice or "complex issues".

Industry Super Funds should be banned from advertising. They have regulatory capture and don't need such promotion. With the savings in advertising costs, they should be able to provide considerably better returns to members and compete on their own merit, rather than hype.

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