Speaking in a recent Momentum Media podcast, Shadow Minister for Financial Services Stuart Robert said he does not support the draft proposal from the Quality of Advice Review to expand the role of superannuation funds in advice.
At the end of August a proposals paper was released as part of the Quality of Advice Review containing a raft of recommendations for improving the regulatory framework for advice.
One of the proposals in the paper was to allow superannuation funds to be able to provide personal advice to members and charge for this advice.
Commenting on the proposals paper, Mr Robert said opening the door for super funds to give advice “would be a retrograde step”.
“Super funds are there to manage large pools of money with a long term focus on providing a dignified retirement for everyday Australians. It’s not there to give you annual advice on a range of investment structures outside of super,” Mr Robert told editor of Mortgage Business Annie Kane.
“Super funds should stick to super. It’s not there to save the world and solve every problem.”
Mr Robert said that banking performed poorly in wealth and will perform badly again if it goes back to them.
“So I’m not convinced that allowing super funds and banking into advice is the right step,” he stated.
Mr Robert said the proposals would see superannuation funds become quasi advice firms.
“Super should stick to super otherwise you’ll get back to the days where you had a large financial services industry providing product advice and surprise, surprise, 76 per cent of the product advice was into [invest] in their own products,” he stated.
“You can just imagine a large super fund sitting there and going ‘we think you should invest in super and take advantage of the concessional and non-concessional contributions, take advantage of the catch up contributions for your spouse who hasn’t been working […] and don’t have that insurance over there because we’ve got group insurance over here’. I can see it a mile away.”
“We’ll be back to the same conflicted advice we were previously.”
Mr Robert does however support the deregulation of the advice.
“We should only have as much regulation as needed. The market has shown it’s not responding well [to the recent regulations introduced] and ordinary Australians are missing out,” he said.
To listen to the full podcast episode click here.
This proposed review does not seem to solve any pressing problems.
I think the people doing this review have little chance of improving anything in the long term as
they seem to be looking at it from the wrong direction
I think The Hayne Royal Commission did not uncover much that the industry did not already know
It probably just bought it to the surface
The submissions that have been called for now seem a waste of time after reading the committees’ first set
of ideas and the direction they are proposing
How do these things always get so far away from common sense?
We just seem to be going backwards
Big super charges fees as a % of member balances. So increasing member balances via more contributions/rollins or less pensions/withdrawals/rollouts is in their own interest. SMSFs have a flat fee structure, so accountants can really only have a conflict on whether one exists.Adding in that contributions, etc is more about tax than the product, accountants look the least conflicted when discussing super. Yet seem to be being left out of the advice discussion.
Vertical integration is THE MOST to blame for financial services problems, not “dodgy advisers”.
Due to posturing, sponsoring and influence peddled by large institutions it was never dealt with, not even by Hayne. This just goes to show how out of touch Hayne and his cabal of lawyers were.
I have an idea, let’s employ people (remunerate and promote them) from our product company and they will advise at all times what is in the clients best interests, and not of the people that pay them. Oh and BTW we will use recently “educated” back packers who complete our internal 2 day course.
I can’t see where this will cause a problem!!!!
Ummm…does this minister understand the current landscape and has he actually read the QAR? Super funds already have financial advisers who provide advice beyond their members super account and they charge a fee for that service. And yes, they also recommend products beyond their own funds. Perhaps if he is capable of seeing this a mile away, he might need to look in front of him first.
Have a closer look at the review. The implication is a watering of the current regs.
I didn’t read the Proposals Paper as allowing superfunds to provide product advice per se. The Paper has talked about allowing the fund to provide simple advice to members re their balances. If they want to give comprehensive advice, the person providing the advice has to be a Relevant Provider.
If you take the base position of the member has a balance and wants to understands the ins and outs of making contributions or, drawing a pension, they are likely to just be wanting to understand how to navigate the options with their existing balance. This has been the call-out where the advice gaps are most prevalent. Simple or episodic advice is costly under the current set-up. If superfunds can undertake this type of member based simple advice, I hope that Relevant Providers also get the same relief so that a current member of a superfund (SMSF) can be given contribution and withdrawal advice without the inordinate amount of regulatory process currently embedded.
In all of this though, where does the suitability of the current fund get reviewed?
If a member of an APRA fund hasn’t engaged with their super and then wants some contribution/pension advice, the starting point would be to undertake a suitability check before providing the requested advice. I agree that even if it was a part of the process, it would be unlikely to result in a change of provider. Likewise, if Accountants are also potentially able to provide this simple advice from a tax angle, the suitability review of a SMSF is unlikely to happen.
So it comes back to conflicts of interest and how that can be navigated. The best interests duty didn’t always result in the client being prioritised over the adviser and the Levy Proposal paper uses that as a reason to get rid of it. I don’t think that requiring the same: adviser, superfund call centre, or an accountant, to give “good advice” resolves the conflicts problem either.
A lot more work is needed to embed the principles of the Code of Ethics into the rhythm of financial advice before the nirvana we are all hoping for can be realised.
Allowing accountants to give strategy holistic advice does not even get to the draft proposal stage. There must be a way of doing this? If this draft proposal is allowed then why not others. My proposal has consistently been ruled out with no valid reason.
I agree with him. Super Funds providing advice is a backward step. I can’t believe they would allow this and on the other hand suitably qualified accountants like myself can’t provide strategic superannuation advice. What s slap in the face.