The Government may drive people out of MySuper products if it completely removes the ability to deduct advice fees.
That is the warning issued by major superannuation industry organisation, the Association of Superannuation Funds of Australia (ASFA) in a submission filed with the Treasury.
In similar fashion to both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA), the ASFA has warned that by closing off the ability to deduct advice fees, members of MySuper products will be forced to move to choice products from which advice fees can still be deducted.
“There is a risk of inadvertently incentivising movement away from MySuper with the complete removal of the ability to deduct advice fees, as members will be required to move in order to receive advice, in circumstances where they do not have the means or inclination to pay for the advice out of pocket,” the ASFA submission said.
“It would also be inequitable to determine whether advice can be accessed based on the type of account or investment option a member has their superannuation invested in. Many consumers are likely to view MySuper as an investment option within their total superannuation account,” it said.
“Practically speaking, from a consumer’s perspective, the effect of the bill is to hinder access to advice and the retirement outcomes they aspire to.”
“As the ASIC [Australian Securities and Investments Commission] report on what consumers really think about advice noted, two of the three most common topics that survey participants said they had either received, or were interested in receiving, financial advice on were retirement income planning and growing their superannuation,” it said.
“One of the key barriers to getting financial advice identified in the report was cost.
If cost continues to be a significant barrier to getting financial advice, prohibiting the deduction of advice fees from MySuper may result in poor consumer outcomes. A growing number of consumers will not receive advice at all or will move to other investment options or products in order to fund the financial advice.”