Do you agree that superannuation fund trustees should be allowed to provide limited, single issue, personal advice to their superannuation fund members?
- No (82%)
- Yes (16%)
- Not sure (2%)
riskinfo is giving advisers and others the opportunity to have their say in our latest poll on the provision of limited advice to superannuation fund members:
Do you agree that superannuation fund trustees should be allowed to provide limited, single issue, personal advice to their superannuation fund members?
This latest poll question follows the reaction generated by ASIC’s recent announcement that it will issue a class order relief that will allow superannuation trustees to provide limited personal advice to their fund members.
Already there has been a strong response to this move by ASIC, with superannuation and institutional associations in favour of allowing limited personal advice to super fund members, contrasted by adviser associations, who are strongly against this proposition (see last week’s article: Limited Advice in Super - Battle Lines Drawn).
The division of opinion between the associations reflects the interests and points of view of the members they represent.
One comment riskinfo has received is from an adviser who has recounted his experience with a similar arrangement that has been implemented in New Zealand:
In New Zealand “KiwiSaver providers” like ING for example can state which fund you are in, and how you can get a Government contribution, but they have to refer to an Adviser for anything more than that. They frustrate the clients by saying, “I cannot tell you what to do, you’d be better talking to an Adviser”.
It’s worked for Advisers and clients since July 2007. I hope that helps you folks over there.
Not sure whether it does, but perhaps we can learn from the experiences of others, even if the circumstances are not exactly the same.
The broad argument in favour of ASIC’s class order relief centres on the contention that many more Australians will have access to basic personal financial advice - ‘…a victory for common sense.’
Some advisers have expressed their opinion that there is room for limited personal advice to superannuation members by trustees, which may in fact generate more advice opportunities for planners:
Forcing super fund members to seek out an FPA or AFA member for some very simple and straight forward advice will only mean that more Australians will be deterred from obtaining any advice at all.
The argument against the class order relief is based around the issue of the superannuation fund trustee being able to offer limited advice without being aware of its members’ broader needs and circumstances. This is best summarised by AFA CEO Richard Klipin’s comment that:
“…it is not financial advice when the trustee does not have to know the member, does not have to understand the member’s needs and objectives, does not have to provide advice which takes into account the member’s entire financial situation, does not have to complete a risk profile on the member and when all the trustee has to offer in terms of investment is its own superannuation fund.”
Other arguments against the class order relief include the fact that super fund trustees may provide advice without necessarily being subject to the compliance regulations under which all financial advisers must operate.
So, have your say on this controversial issue. Make your vote count and add your own comments below. We will report the outcomes to you next week.
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10 Comments
One set of rules for all. Super funds should not be offered exemptions to the rules that professional planners are held accountable to.
firstly let me start off by saying that I am a risk adviser with firm in the central west of NSW. To try to give myself the possible chance of understanding both sides of the situation I have taken my adviser hat off and put on my consumer hat. As a consumer talking with the Superannuation trustee trying to envisage what type of questions the consumer will ask is
Do I have enough Life insurance? do you think I should have TPD or income Protection? Will I have enough super for when I retire? Is my super invested in the best place?. how is someone going to advise on these things without having to know the client. After years of study and training to be in a position to answer these questions it now seems that the goal posts have been moved.
Like the farmers on the Liverpool Plains they cant beat BHP mining or the residents of Scone with wind turbines.Once governments decide on a plan of action there is no stopping them.
If you look at the areas that the fund Trustees can give advice about, it really is very limited.
As far as the question “will I have enough super to retire on” well there have been 100’s of on-line calculators available for ages. So no real change there.
The ATO released the Etax facility a couple of years ago which means that Accountants have lost the simpler Mum and dad business. This in turn means that Accountants can now focus on the larger more complex clients.
Likewise I don’t think that the introduction of intra fund advice will make a major difference to FP’s.
Personally I think that we as a Profession have a great deal of damage repair to complete to reinstate our credibility before we start taking the high ground about this issue. The FPA certainly cannot take the moral high ground until they start weeding out the small number of unethical planners who do so much damage to our industry.
Finally it is ironic that for so long the industry funds have been banging on about breaking the nexus between producer and adviser and yet in this one piece of legisation ASIC is giving credence to this issue.
Ditto Paul Toshack.
Only yesterday a business owner suggested that they had $150k T/TPD in their super and had considerd that sufficient for their needs - that is until we complted a fact find with all the ancillary questions and scenarios put up during the process. As usual nothing is a simple as it seems, with a business partner, blended family, Uni kids still dependant, personal business debt, need I go on. There is this danger of customers having a false sense of security with the pittance they have in super, which if needed to be called upon would leave their entire family and business in a fiancial mess/ruin.
Maybe, just maybe for the run of the mill wage earner, provided the super fund is obliged to “know their cleint” they can actually provide a decent level of basic cover - however you wouldn’t be able to qualify them as such unless you carried out a fact find. Dare I say not just providing the $1 a week stuff which decreases in value as the client ages - very poor protection indeed.
Like the rest of us who have spent years training and keeping up with changes in the Risk field and are now experienced at determining the clients needs and desires, and qualified to give this crucial planning advice -staff of Super Funds should be required to do so also - or we take a huge step backwards after years of regulation and protection for consumers.
It is my understanding, and practice, that unless someone has done their own research and comes to an adviser with a product and an amount of cover they desire to put in place with the instruction to do so for them - there is “NO SUCH ADVICE” as “LIMITED ADVICE”.
If the fund managers when asked by a client can only advise on their particular product what chance has a member got in getting appropriate advice tailored to their specific needs?
I am an employee with my investments going into an industry fund and I cant even get them to send me some paper work so what chance do I have of getting advice that is correct and unbiased from my fund manager?
Trustees of super funds are just that…trustees (custodians) not advisers.
As an industry how can we expect clients to value our advice and be prepared to pay for it when it’s positioned to them that they can get it free of charge from their super fund.
This double standard has done nothing but tarnish the value of advice from financial planning professionals.
It also raises questions as to how much respect the Government and ASIC have towards the financial advice industry.
It would be greatly more effective if there were a “Financial Health” means-tested allowance to subsidise the cost of real personal advice to lower socio-economic persons so that advisers were less disincentivised to turn them away. Most currently get none of the essential advice that they need.
In principal I don’t object to the concept. Except that everyone knows it will be abused.
ASIC is living in cloud cuckoo land because they detach themselves from the adviser market place never talk to advisers and won’t acknowledge or act on complaints.
This concept is driven by the need of the not for profit funds to withstand performance related complaints from a very unsophisticated membership.
I am constantly reminded by clients who have cover and accumulation in not for profit funds that the education of those clients has been non-existant. Most don’t understand that their insurance cover decreases as they get older and that it has to because the cost of the insurance stays the same every week; most don’t understand the impact of buy/sell charges and the doubling of those buy/sell charges when the contribution is converted firstly to units, and then reconverted to cash to pay the insurance premiums with a nice little buy/sell earner every time. No-one explains smoothing and every one of these clients thinks they have a bank account and not a unit linked investment. No one gets advice on the bloody awful lack of contractual- right- to- claim in the income protection offerings in these funds.
Needless to say you can bank on it that if the person on the phone (I refuse to use the word adviser) thinks there is a scope for an up-sell, the member will be specifically & quickly referred to the fee for service financial planning arm run by Garry Weaven.
I don’t think this plan is about advice at all. I think these funds are protecting their patch and the phone conversation with the call-centre will include the usual clap-trap about commissions and not delve into reasons for poor fund performance and will undoubtedly suggest to people that they move funds from a losing fund to a “winning” fund because it is easy.
Remember these people are the most unsophisticated clients we can have - they need education and we can provide that education and the advice that comes of it, and only after we have ascertained their full personal situation.
One final point. Some Trustees require an insured to provide 2 independent specialist opinions, in addition to that provided by the funds insurer for the certification of either terminal illness or any occupation TPD. How on earth can that be explained over the phone by someone in a call centre - it’s a bloody joke.