There has been strong reaction, both positive and negative, to last week’s announcement by the Federal Government that will allow superannuation fund trustees to provide limited, single issue, personal advice to superannuation fund members.
Introduced by ASIC through a conditional ‘class order relief’ from requirements under the Corporations Act, licensed super fund trustees may now provide factual information and personal advice to their members about their existing interest in a superannuation fund on issues which include:
- Investment options
- Contributions
- Insurance
- Financial Hardship
According to ASIC Chairman, Tony D’Aloisio, the aim of providing this relief is “…to clarify existing law and increase super fund members’ access to advice about their existing interest in a super fund.”
Reaction to this move by various groups within the financial services industry has been determined according to the interests of the members they represent:
FPA
The Financial Planning Association (FPA) has strongly condemned ASIC’s class order relief. CEO, Jo-Anne Bloch, said this plan threatens to put the superannuation savings of millions of Australians at risk:
…this plan threatens to put the superannuation savings of millions of Australians at risk
“There are 16,000 financial planners who are ready, willing and able to provide low cost advice to super fund members, yet the Minister for Financial Services, Superannuation and Corporations Law and Minister for Finance and Deregulation have chosen to support a free kick to Trustees who are not well equipped to deliver individual financial advice to superannuation members,” said Ms Bloch.
The FPA adds that its members will campaign actively against this initiative.
AFA
The Association of Financial Advisers has voiced equally strong condemnation over the class order relief, suggesting it ‘ marks a return to the Dark Ages for advice.’
Referring to the Corporations Act requirement to know your client, know your product and provide appropriate advice,” AFA CEO, Richard Klipin, said:
“…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.”
…advice on the majority of superannuation investments will come mainly from superannuation trustees who have a vested interest
In attempting to democratize access to advice, Mr Klipin believes ASIC and the Government will ultimately achieve the exact opposite. He suggests that under this initiative, advice on the majority of superannuation investments will come mainly from superannuation trustees who have a vested interest:
“Policy driven by ideology usually ends in tears, with significant unintended consequences,” concluded Mr Klipin.
The strong language used by both the FPA and AFA in responding to the class order relief highlights the seriousness of the issue from their stand-point, but on the other side of the coin….
ASFA
The Association of Superannuation Funds of Australia (ASFA) has welcomed the class order relief as ‘a victory for common sense’.
ASFA believes members of superannuation funds will be the winners from this initiative, with ASFA CEO, Pauline Vamos, stating:
“The important benefit to the average fund member is that their fund will be better able to answer direct questions on single issues, such as their level of insurance, their investment choice, or perhaps whether they should access the government’s co-contribution. It will help drive members to make the most of their super,” said Ms Vamos, who added:
This is not about competing with financial planners…
“This is not about competing with financial planners – it is about providing assistance to the average fund member who does not have the money to go to a financial planner.”
“Financial planners who act in the best interests of members and are able to provide advice without the need to sell a product will continue to have a key role to play in the provision of in-product advice,” said Ms Vamos.
IFSA
Representing financial institutions, The Investment and Financial Services Association (IFSA) has welcomed the class order relief, saying it has been ‘…unnecessarily expensive to obtain basic financial advice’ since the introduction of the Financial Services reform package.
But IFSA also believes this move does not go far enough.
IFSA … believes this move does not go far enough
Outgoing CEO, Richard Gilbert, said “The relief is limited to intra fund superannuation investments and does not apply outside superannuation where there is also significant need to make financial advice more accessible.
“IFSA has long called for amendments to the law to remove existing uncertainties around personal advice and to facilitate the provision of limited advice,” said Mr Gilbert, who concluded:
“Our industry is willing to continue to work with Government and the regulator to truly enable the provision of limited advice for consumers and for further measures that address the broader need for financial advice within our community.”
The Federal Government, ASIC, ASFA and IFSA all support the class order relief because each sees a benefit to the ordinary superannuation member, while the adviser representative bodies, FPA and AFA hold the totally opposite view, namely that ordinary superannuation fund members will ultimately suffer as a result of being given access to limited, single issue, personal advice.
riskinfo will monitor and report developments, but in the mean time, take the opportunity to make your voice heard in our comments section below…
It is about time some common sense came into the equation. I am an adviser who would fit into the AFA and FPA but I refuse to be involved with either due to their parochial stance. 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.
Allowing funds to ‘advise’ on personal insurance is misleading to the consumer. They cannot provide advice as to whether they should have things like trauma or own occ TPD cover. Encouraging consumers that their super fund has their insurance needs “taken care of” is misleading and possibly dangerous. Given how this authority is framed, there doesn’t seem the consumer would have any recourse should they be worse off for having accepted and followed such advice. Personal insurance is too important to be dealt with in this fashion.
Richard Gilbert says: “The relief is limited to intra fund superannuation investments and does not apply outside superannuation where there is also significant need to make financial advice more accessible.
“IFSA has long called for amendments to the law to remove existing uncertainties around personal advice and to facilitate the provision of limited advice,”
This statement clearly shows that the IFSA believes trustees should not have any restriction on the advice they provide. (What is ‘limited advice’?) Obviously, the IFSA is attempting to have trustees provide advice without having the onerous compliance duties that financial planners have to face every day.
Personally, I do not have a problem with trustees being allowed to provide advice to members. However, I do have a problem if the advice is given without having to meet the same compliance and laws prior to providing any advice in the same way as financial planners are required to do.
FPA credibity on this issue will be zero for so long as they represent a group whose membership included Storm Financial.
They have some cheek in questioning the ability and the motives of Trustees in the provision of credible single issue advice to members.
This seem to me a step back to deregulation again. Maybe the Trustees and the advisers should work together and remember the Client is number 1 not their own bottom lines. Still it seem to me a little information provide badly can lead to bad decision being made and cause long term pain for a short term solution.
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.
The intention for Superannuation funds to provide so-called “limited advice” to “only intra Super investments” can only be viewed as a’thin-edge-of-the-wedge’tactic as a means to herald larger scale changes to this financial sector,however it would give rise to a ‘Pandora’s Box’ conflicting range of interests between the Funds and the Advisers. The effect would lead to an unnecessary influx of Superannuation member confusion well beyond the present level.This “generic financial advice” mechanism would therefore act as catalyst in the undermining and devaluation of the professional status of Financial Planners and Superannuation Advisers per se : but maybe this likely outcome strikes at the very core of this intention.
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