Research used by the Industry Super Network (ISN) to support its advocacy of opt-in requirements has been panned by sections of the financial planning industry.
The Rice Warner study compares the cost of simple advice provided by Industry Funds Financial Planning (IFFP) to the cost of the same advice if it were provided within a retail super fund, using retail products and charging under an asset-based remuneration model, with the IFFP considerably cheaper in each of the five case studies assessed.
Financial Planning Association (FPA) chief executive Mark Rantall (pictured) said he was concerned the data was being used out of context by the ISN to suit its own purposes.
"The use of that research is totally unrealistic, it’s not comparing apples with apples," he said. "Why the ISN would seek to attack advice based on this research or for any other reason is completely beyond us, and we don’t think it’s in the public’s best interests going forward."
The study does not account for quality of advice or include any full holistic financial planning examples, but rather is a purely cost-based comparison of superannuation product and advice costs.
"The ISN has sought to manipulate data to further their position around opt-in, which is totally inappropriate. It can be done for no other reason than for a scare campaign to the Australian public about financial planners, with a view to ensuring people go and see an industry superannuation fund," Rantall said.
ISN chief executive David Whiteley told Money Management he was confident in the research, which he said simply highlights the difference between someone paying for advice on a genuine fee-for-service basis versus what would happen if they were paying an ongoing asset-based fee.
Opt-in will ensure that those clients who are paying ongoing fees but not receiving any service will be prompted to make a decision, otherwise through inertia they will continue to pay for that service, he said.
Rantall said the research seemed to take the end result then attempted to retrofit the data to suit the end purpose.
Responding to suggestions that IFFP may have provided examples that suited the end result of the study, ISN strategy manager Robbie Campo said Rice Warner established the criteria for the examples, then asked IFFP to provide examples based on those criteria.
Rantall said that some of the assumptions are totally inappropriate and would not happen in the real world. The FPA is supportive of limited advice, but a person’s full financial situation needs to be taken into account, he said.
In one of the case studies a client’s negative gearing obligations are not taken into account, but Campo said that the income/tax deductions are incidental to the advice provided and gearing strategies would need to be separately charged in both the IFFP and retail outcomes, meaning it was appropriate for Rice Warner to scope the assumptions the way they did.
Boutique Financial Planning Principals Group president Claude Santucci described the study as a farce.
"They’re saying that if you pay an up front fee that’s cheaper than ongoing fees. Well of course it is but to suggest that one is equivalent to the other is spreadsheet stupidity," he said.
Both Rantall and Santucci said the ISN should be able to promote the benefits of industry super funds without attacking other parts of the industry.
