The Industry Super Network (ISN) has released research which it says proves that the proposed opt-in reforms will reduce advice fees for consumers.
The study, conducted by actuarial firm, Rice Warner, modelled five common simple advice scenarios and found that in every case the consumer was better off using Industry Funds Financial Planning (IFFP) than paying an adviser ongoing asset based fees.
According to Rice Warner, the findings demonstrated that where consumers paid for advice on an upfront basis (the IFFP model), the cost was between two and seventeen times cheaper.
One off and transparent charging for financial advice will reduce costs to consumers
ISN Chief Executive, David Whitely, said the study systematically debunked the myth that the Future of Financial Advice (FoFA) reforms would increase the cost of financial advice to consumers.
“The report demonstrates ongoing fees are typically the most expensive way to pay for financial advice. The report shows that, as proposed in the Government’s FoFA reforms, one off and transparent charging for financial advice will reduce costs to consumers. This will consequently increase the capacity for ordinary Australians to access financial advice, whether from financial planners, accountants or super funds,” he said.
The ISN argued that the study reinforces the importance of the Government’s opt-in proposals to protect consumers paying fees to financial planners for advice they do not receive.
“Ongoing fees are a very expensive way to pay for financial advice and this is shutting out the four out of five consumers who do not seek professional advice,” Mr Whitely said. “The Government’s reforms will ensure advice fees are transparent. The opt-in measure will ensure that consumers are not paying for advice that they do not receive and this will make advice a lot more affordable and accessible for ordinary Australians.”
In its report, Rice Warner explained that the recommendations made for each scenario were based on the assumption that the clients were already members of an Industry Super Fund, and that these members only wanted advice related to aspects of their superannuation arrangements. The modelling assumed that none of the clients required a regular ongoing review of their strategy.
The report also noted that the fees provided by IFFP for use in the updated study were different from those supplied for the original modelling (conducted in late 2008).
The new fees used were:
- $275 for a simple advice service (down from $660)
- $1,760 plus $560 per annum ongoing (down from $2,630 + $880 per annum).
The calculations used for advice provided by advisers using a commission-based model did not take into account the proposed ban on commissions for investment and superannuation products. In relation to this, the report stated: ‘We note that the second model (the commission/asset based model) will be greatly modified under the proposed FoFA changes to be introduced as legislation over the next few months. However, the final details of these changes and the impact on member fees are not yet known.’
Typically biased research. If the researcher does not include ongoing service then the report is slanted and the client misses out on valuable service. By not including ongoing service the statement that opt-in is cheaper is misleading and deceptive.
Well that is true to form the ISN not providing regular reviews….to them it is a set and forget strategy anyway, in their opinion a clients situation never changes. Rice Warner should be ashamed of themselves being assocated with that study…..or are they too owned by the ISN???
Time for this Govt and its bias towards the union movement to be given the boot!!!!
If the industry funds management think opt in is good for consumers why have they got opt out for the insurance on members which in many cases destroys their members benefits as many do not know they have these covers. Double standrads as usual.
Rice warner clearly asked ISF what result they wanted and tailored the cases to suit.
Also, if Mr Whitely is an officebearer or shareholder of Industry Super Holdings P/L, which is making over $20m p.a. profit, then the clear ASIC guidelines on Conflict should make him shut the hell up
I saw an Australian Super fee structure and it was double these figures quoted.
Absolute tosh!!
Typical of Industry funds, they do not understand the value of the ongoing client/Adviser relationship.
Of course it is cheaper to pay for just upfront advice and not pay for ongoing advice, this report should never be allowed to be published.
So the research doesn’t take FOFa into account, neither does it take ongoing service into account because both of these would tilt the research away from the intended biased result…..no wonder it’s cheaper…..it adds NO value to the client….which is pretty much par for any research undertaken to provide a result that suits the purpose of the researcher……
What would an industry fund know about ongoing service? For years they have had clients just sitting inconservavtive investments because they were of a certain age and now when they are ready for retirement the clients find that they have about $100k less than if they had stayed in a balanced or even growth strategy. Ongoing advice 10 years ago could have made a large difference to todays payouts. Thee Opt in process is flawed in that if for some reason like the client is overseas, sick or on holidays the fee will be shut down and the client will not get advice until it is reestablished. Imagine if that had happened in the GFC! Once again these union driven divisive group talk about something they haven’t ever provided and now want to tell us how it is done!! Come on!! Billions in unlaimed super who lost the client? I would suggest that a small portion of these were tied to an adviser.
Why do the press, including this publication, continue to give coverage to this ‘face’ of industry funds. They have not been seriously involved with the advice business to date, so why are they constantly used as the sounding board for whether these proposed changes are good or not. Because they want to get into the industry and they want their comrades in the Government to make their entry as easy as possible for them. Talk about conflicts of interest and ‘disclosure’. Who pays his salary? He does not work for an industry fund does he. So who funds the ISN? They don’t provide any service as such themselves so it must be the mug industry fund members that pay his wage. I bet they don’t know that however. Don’t their ads say ‘only to benefit members’? Further, I can guarantee you that some of their ‘advice’ offerings to date have been heavily subsidised by the funds themselves. this means members that haven’t sought advice have had some of their fees used to pay for the advice sought by others. Funny, this sounds a bit like the system that they claim is flawed and unfair. I would,’t trust any survey or report they had commissioned. Who pays for these reports by the way???
Clearly not a independant review of the fee structure with op-in. As with any change comes another level of administration for implementation and maintemance going forward. This cost will need to be paid for. Also currently clients are not charged for say ringing the advisers office to discuss a general query in regards to there investment or insurance product. Under the proposed scheme, only those that have specifically opted in will be able to receive these types of services. Hence what will happen is for those that opt in there fees will go up to cover the increase in costs for the changes and also to cover the services cost as the general services will now have to be directly paid by the clients that have opted in. And those that don’t opt in when they need some advice on there existing product they will have to either opt-in and have to pay a minimum fee or pay a minimum one-off fee. So depending of the size of there investment there fees will most likely go up. Overall what the impact of this will be is advice will become unaffordable to middle to low income earners (who generally need it the most). This will change the landscape from many paying a small amount for basic ongoing and incidential advice (even though some may not be using this service all the time or rarely) to only a user pays system which means that consequently the cost of that advice will go up.
This MIGHT be useful if Mr Whitely was honest about the level of fees charged by ISN funds. I know of at least one charging a minimum of $3,000 for a Statement of Advice and then once the client has gone ahead, in order to receive any furthe advice they want to charge them $290.00 per hour. That is if they can find an Adviser in that network that even wants to help them! Ongoing Service…. ISN’s wouldnt know the meaning of this.
Can these guys be serious. They know nothing about their clients. I had a women in tears in my office about to lose her home because an industry fund told her she couldn’t get her super because her old employer had not told them she had been sacked – she was over 60 and still not working. Four months later she over came the ISF perpetuated evilness and saw a real adviser. These people are like their politician friends prepared to lie and say anything to get their way.
Nice spin from Mr Whitely and a nice little white lie once again. This man has no limit to how much rubbish he is prepared to put out there. We can all cook the books David ! and it would seem you are very good at it.
Like most surveys they are not worth a pinch of …..any survey can be manipulated to ask questions in a way to get the desired response or outcome.Yep check out Australian Supers fees on line
ISN are great spin doctors! They commission reports their journalist mates print so they can win the publicity war. It’s all about marketing. Industry funds are supposedly cheap and this is their angle. If everybody bought on price us advisers wouldn’t have any clients! We’d all also be driving Hyundais and not more expensive and safer cars! It’s propaganda to try and keep their retiring members with Industry Funds. The Industry Funds are losing 70% of retired members to Advisers at the moment because people value advice and will pay for good advice. The government has made super and Centrelink rules so complex people need the services of Advisers. Why have the Opt in when clients will be able to opt out at any stage after 1/7/12? The unions think we’ll be getting free money from our clients. There is no such thing. We have to be trained, pay for PI cover and pay for the costs of staff and premises so when clients call we are there to service them. Clients are happy to pay for a service where they get the same person who knows their circumstances rather than a call centre person who doesn’t have any relationship with the client. The unions have now convinced the consumer bodies that we are rip off merchants as well!
Another gem! Just met with a client who had income protection through and industry fund – paying over $400pa for a small benefit. Trouble was, she hasn’t worked since she gave birth to the first of her three children about 8 years ago and she would receive nothing if she had an accident or got sick as she has no income! The fund claim that if they are not informed that she has finsihed work then how are they to know she isn’t working? (I would have thought employer contributions stopping may have been a clue!) So where’s their ongoing service to this lady? They still charge her management fees as well as the premiums – but take absolutely no interest in the client. Maybe they need a grubby adviser attached to their plan who may have picked this up. She would have paid less in ‘commission’ than she would have in wasted premiums in this case.
We all give David Whitely oxygen by posting a flurry of responses to his stupidity. In my opinion, the man has no credibility in the industry so why bother wasting effort with a response to any outlandish claims he makes. Rice Warner have also destroyed any credibility they may have had with me by publishing such obviously biased findings. Perhaps a boycot of their products and services by financial planning industry practitioners is appropriate under the circumstances. Instead of responding to outlandish claims within these columns, our interests would be better served by writing to our clients urging a change of government at the next election and writing to our MP’s voicing our objections to the proposed regulatory changes.
Typical propaganda BS. Other studies have already shown advice from non Labor Party backed union/industry funds will increase due to increased administration cost of around $50,000 per average practise.
So unless the study is implying advisery business profits are so high and need to be trimmed this doesn’t even make any sense.
Ultimately, you get what you pay for!!!
Rice Warner – Shame shame shame
Check out the real world – model australian supers $4868 max plan prep fee on its fees for advice section. Whitely just wont flush will he ?
IFFP can’t make a profit and do not have to as they are subsidised by their industry fund mates (isn’t that a trail commission) – so they can charge so little. What hypocrites!
Another risk adviser told me recently of a death claim with a construction industry fund ( CBus ) which took over a year for a piddling sum insured ( what else would it be ?)
Seems they wanted, in triplicate, certified copies of everything but the cat’s a…..e. No one at the fund would takes responsibility !
Having your life cover in super is good, for some.
We now live in a society where marraige is increasingly regarded as not being a necessity and defacto relationships are very common. We also know some people will be distracted from the relationship they have and dally elsewhere, often producing progeny. Two spouses and two lots of children equals nightmares with a death claim if the policy is held in super. Trustees are notoriously unpredictable, and I have one case which took 5 years to resolve – Trustees, lawyers, FOS and courts all involved
only committed advisers have the gaul and empathy with their clients to ask these hard questions, drilling down for the truth. Most of us have seen cases where the crap ” service ” from the ISN lot ( sometimes over many funds ) have created nightmares for widows when a little bit of estate planning would have solved a lot of the problem.
ISN funds will NEVER be able to provide such valuable services. Only an adviser with a client relationship ( and not a “relationship ” created by an Opt-In rule )can offer this service.
Why should we do this IF we don’t get paid ? How is it fair to ask a widow to pay a fee to get the mess sorted, or at least ensure the situation ( read mess ) is understood by the contesting parties
The argument we put, could convince the pope there is no god, we would have better luck with that, than wasting time trying to talk sense to this Government. They are not willing to listen, so tell them something they will take notice of.
“keep going on this angle and we will lobby the electorate to have you thrown out of office at the next election.”
They will start listening then,self preservation is their only interest, attack them the way they are attacking us and watch them fold.
Being gentlemanly in a fist fight means you are still going to get beaten up.
It is time to take the fight to them.
The Rice Warner report does not factor in the cost today of running an Independent financial planning practise with all the compliance that we are required to do today which will increase with FOFA. As an advisor a $560 annual fee will not cover the costs and to be fully responsible for the Ongoing Investment Advice.A client can sue you at any point in time in the future for your advice you would not take on a client if they were not paying an ongoing fee for this responsibility of the adviser looking after the portfolio and doing regular reviews for $560pa,this is absurd . The larger the portfolio the more the client should pay because of the risk and responsibility. Rice Warner mentions Industry Funds . My opinion about this is that out of all the people I see the most under insured people are those with Industry Funds with no adviser. If they think that by removing commissions on insurance in super will make people takeup more insurance they have their head in the sand. All you have to do is do a survey of people with Industry Super funds and compare with people who have a financial adviser and you will get your answer. I believe that the Insurance cover will decline because People in Industry Funds will not take up any more cover because its a few cents cheaper , but the overall reduction in cover will occur because advisers will get out of the Industry and the existing advisers will not write as much insurance cover because financial planners generally don’t like selling insurance and this will certainly happen when commission is removed.
I think Politicians have no idea on what damage they are going to do to the Insurance take up level in Australia
Comments are closed.