The Association of Financial Advisers (AFA) has hit back against a recent industry super funds claim that consumers would be $82,000 better off in retirement if they did not pay fees to financial advisers, saying the research is “simplistic”.
The Industry Super Network (ISN) has released new modelling which it says shows that members of industry super funds are, on average, $82,000 better off than those in retail superannuation funds because they do not pay fees or commissions for financial advice.
The AFA argues that the study fails to take into account the impact of strategic financial advice and is “a blatant attempt to shift attention away from industry funds’ own opaque administration fees”.
That’s less than the cost of a cup of coffee and a biscuit a day
“The $82,000 is a number the industry fund movement calculated for a forty year period. That’s less than the cost of a cup of coffee and a biscuit a day,” said AFA President, Brad Fox.
“And yet the difference that strategic financial advice can make to a client’s financial situation over the same period of time can translate to much higher superannuation balances and significantly better protection against the financial impact of early death, disablement and serious illness.”
The research comes one week after the ISN announced its plan to advertise the availability of intra-fund advice and other financial planning services within its network (see: New Campaign to Promote Advice Services Through Super Funds).
ISN Chief Executive, David Whitely, said: “Ongoing financial advice fees and sales commissions erode member’s superannuation savings reducing their super payout on retirement.”
“The debate about the adequacy of retirement savings is placed in stark relief when the effect of ongoing fees for financial advice, sales commissions, volume payments and other incentives paid to financial planners are considered”, he added.
In response, Mr Fox countered that: “It is hypocritical on their part to argue for transparency around adviser remuneration when they do not themselves disclose how they are spending the admin fees they charge their members.”
“As they are not-for-profit, they must be using admin fees to fund their multi-million dollar advertising campaigns in print and on TV. It’s hard to see how this use of money ‘profits members’,” Mr Fox said.
“The wages of call centre advisers providing intra-fund advice to members must be paid somehow. If not from members fees, then how?”
The modelling was conducted by SuperRatings, comparing the average fees for 16 Industry Super Funds and 16 retail super funds, over 40 years, using a starting balance of $20,000, and initial salary of $50,000.
