In an email to parliamentarians sent on Sunday, AIOFP executive director Peter Johnston said the last major issue for the government to address in ensuring an advice industry that was centred around consumer best interest was “vertical integration [in] the industry super fund landscape”.
“Industry funds… are permitted to charge a margin to all members to fund advice, but less than 10 per cent of members seek advice — a classic fee for no service scenario that was castigated by Hayne,” Mr Johnston said.
“This margin funds their 1,000-plus advisers who are paid a salary plus bonus derived from offering members their internal product — this is a disguised commission to reward conflicted behaviour, a clear breach of FOFA/FASEA.”
The comments follow recent reporting from sister brand ifa around bonuses received by advisers at First State Super-aligned StatePlus. First State Super recently merged with public offer fund VicSuper, which provides advice to around 2 per cent of fund members per year.
Mr Johnston also pointed out that intra-fund advisers were not required to comply with opt-in legislation due to come into force at the end of 2020, where clients would need to authorise ongoing adviser fees on an annual basis, because the advice was usually included in compulsory annual administration fees paid by fund members.
He added that an easy solution to level the playing field was “for all super fund members, like other consumers, to pay directly for the advice they receive regardless of whether it is general or internal”.
“They [would] have the option of having the fee deducted from their account or paying directly,” Mr Johnston said.
“This will not penalise the circa 90 per cent of super members who do not seek advice from their super fund, leading to healthier account balances for the majority.”
The email was part of the AIOFP’s ongoing adviser awareness program, which aims to educate a wider cross-section of politicians around the dynamics of the advice industry.
The FPA also recently conceded the charging model for intra-fund advice “could be reconsidered”, following a recommendation in its 2020 policy platform calling for a single set of fee rules across all types of advice.
What a level playing field with Industry Super. Tell him he’s dreaming.
Whilst it would make a lot of sense and it is absurd that All Industry Fund members pay advice fees for less than 10% of members that use Advice.
Classic Fees for No Service !!!!!
Not a hope in hell ASIC, ATO, APRA and Labor Govt will do anything against Industry Super Funds. They are a law unto themselves and can what ever they like with Govt Regulator blessing.