Industry funds attack commissions-based advice

The Industry Superannuation Funds Network (ISFN) has raised both the AMP enforceable undertaking and the issue of shelf fees as clear arguments against the provision of commissions-based financial advice in the superannuation industry.

In a submission to the Parliamentary Inquiry into structure of the superannuation industry, the ISFN called for changes to the legislative obligations governing the provision of financial advice “to increase the professional duties imposed on financial advisers and ban commissions on superannuation guarantee payments”.

The submission went on to argue that commissions, particularly trailing commissions, significantly undermined retirement savings.

“Trail commissions are funded by the fund manager deducting a payment that would typically range between 0.4 and 1 per cent of invested funds and paying this amount to the adviser for the entire period that the client remains in the product,” it said. “The ongoing nature of this commission means that it eats into the client’s savings and is magnified by the impact of compound interest.

“Given the erosive effects of percentage-based fees notionally charged by advice, the ISFN recommends that commission-based charges for advice funded from the superannuation product be banned,” the submission said.