Intrafund advice needs to pass the test of having left the client better off, according to the Australian Securities and Investments Commission (ASIC).
In yet another attempt to outline the status of intrafund advice to a Parliamentary committee, ASIC has used an answer to a question on notice to make clear that there is an inherent need for the advice to have left the client better off for the superannuation fund to then charge the cost to the broader fund membership.
In an answer to a question on notice from the House of Representatives Standing Committee on Economics, ASIC said that consumers who sought financial advice, including scaled advice under an intra-fund arrangement, expected “that the advice provided will leave them in a better position”.
“When assessing whether an advice provider has complied with the best interests duty, we will consider whether a reasonable advice provider would believe that the client is likely to be in a better position if the client follows the advice provided,” the regulator said.
Elsewhere in its answer, ASIC said intra-fund advice is not a legal concept or a separate type of advice.
“Intra-fund advice is a term widely used in the industry to refer to the scaled or limited scope personal advice that a superannuation trustee can provide to members on the basis that the cost of the advice is borne by all members of the fund,” it said.
“Under the SIS Act the cost of scaled or limited scope personal advice can only be borne by all members of the fund if it covers certain limited topics, related to the member’s interest in the fund, and is not ongoing advice. The SIS Act deals only with the funding mechanism for this advice; it does not deal with the obligations of the financial advice provider in providing the advice,” ASIC said.
“Any personal advice provided under an intra-fund arrangement must, like all scaled advice or limited scope personal advice, comply with the best interests duty and related obligations and the disclosure obligations in the Corporations Act that are applicable to personal advice.”