The Investment and Financial Services Association (IFSA) has today announced a landmark Superannuation Charter in its bid to ‘… create a fairer and more competitive superannuation system for all Australians’, which includes a ‘new approach’ to payment for financial advice.
The Association’s Draft Superannuation Charter: A New Commitment to Super Members, contains four key policy areas:
- Increased transparency and control in payments to advisers
- Enhanced competition through more informed choice
- Improved regulation of the superannuation industry
- Partnership approach with regulators and government
On the issue of payment for financial advice in superannuation, outgoing IFSA CEO, Richard Gilbert, said that commencing from July 2010, IFSA is planning a fresh approach:
Fund members will be able to negotiate the value they receive for the advice fees they pay – and to opt-in or opt-out of advice payments…
“Under the new regime consumers will be empowered by knowing exactly how much they are paying for financial advice in their superannuation. Fund members will be able to negotiate the value they receive for the advice fees they pay – and to opt-in or opt-out of advice payments depending on their circumstances and needs,” said Mr Gilbert.
In addressing the four policy areas, Mr Gilbert said “While some recommendations are for government and regulators to address, one very important set of reforms is for the industry to deliver. And deliver we will.”
Under the draft charter, IFSA proposes two forms of remuneration structures in its ‘payments to advisers policy’:
1. Member Advice Fee
Taken from the draft charter document, the member advice fee is outlined as follows:
When an individual receives personal financial advice from a financial adviser in respect of a superannuation account, they will be asked to agree the amount they will pay and how the payment will be made. It also allows super members to turn the payment off if they cease the relationship with their adviser.
The introduction of this policy means that no fees will be paid by super members to financial advisers in respect of personal financial advice, unless the service is received and the payment agreed by the member.
2. Plan Service Fee
The Plan Service Fee relates to corporate superannuation plans established by a financial adviser:
When a corporate plan is established by a financial adviser, ongoing support and administration services are often provided by that adviser to the corporate plan members. The PSF is applicable only where those adviser services are paid from corporate plan member super accounts.
Under IFSA’s Super Charter, the annual statements provided to plan members will include the value of the PSF being paid to a financial adviser. After an initial period of time, members that wish to will be able to opt out of receiving the additional adviser services and therefore from paying the PSF.
The policies proposed by IFSA are intended to be open for discussion until Monday 14 September 2009, with the IFSA Board looking to formally adopt the Super Charter at its Board meeting on Wednesday 28 October 2009.
Once adopted, these policies will see a transition period from 1 July 2010, with full implementation expected to be completed by 1 July 2012.
IFSA also acknowledges the recent Financial Planner Remuneration discussion paper released by the FPA, commenting that the policies outlined in IFSA’s draft Superannuation Charter are complementary objectives to those outlined by the FPA.
In an early response to IFSA’s draft Superannuation Charter, MLC has welcomed the initiative as a fantastic opportunity it provides to improve trust and transparency in superannuation and the financial advice profession.
CEO of MLC, Steve Tucker commented, “The introduction of IFSA’s Super Charter, together with the FPA’s consultation paper on adviser remuneration, means the industry now has a united front to address some of the issues that have been plaguing the reputation of financial advisers.”
Advisers wishing to access a copy of this important draft Superannuation Charter can take the following link: IFSA Draft Superannuation Charter 17 June 2009
i am a single planner practice (23 years)with a shopfront and one staff how do you see me paying my overheads next week if nobody wants any advice .
and everybody seems to have forgotten how trail commission started .
If you have been around long enough you will remember that it came from fund managers deferring upfront commission i would be interested in an answer
To share an outsider’s perspective, it makes no sense to me whatsoever for service providers to continue to receive fees after the service has finished being provided. For example, a doctor doesn’t receive ongoing trail commission for recommending that someone install a pacemaker (nor does he/she receive upfront commission for that matter – just the consultation fee).
The answer to your question is harsh but quite simple; if no-one wants your advice, then your business should not exist. The intention of the changes outlined above is to increase transparency and reduce informational asymmetry. In my opinion any financial planning organisation whose viability is threatened by this cannot be achieving optimal outcomes for clients.
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