The Australian Securities and Investments Commission (ASIC) has been encouraged to use its existing regulatory tools to extend intra-fund advice to retirement income strategies including spouses in similar terms to the manner in which it regulated around advice on early release superannuation.
Industry Super Australia (ISA) has specifically nominated ASIC’s regulatory approach to early release superannuation in arguing for the extension to intra-fund advice, in a submission to ASIC which also argues that “in a compulsory superannuation system with poor financial literacy, most members should be able to rely on default settings that protect their interests without recourse to personal advice”.
“With an ageing population there is a significant number of fund members reaching the retirement phase. Industry funds have frequent conversations with members about when to retire, if they will have enough money on which to retire, how they can maximise Centrelink payments (e.g. Age Pension) and how to draw down on their superannuation savings,” the ISA submission to ASIC’s affordable advice review said.
“A fund member will generally think in terms of household assets when making these decisions. Funds should be able to give intra-fund advice that considers not just the member but also their household, i.e., spouse/partner and, if applicable, their dependent/s.”
“To address this need, ISA recommends that:
- Advice about retirement adequacy and Age Pension eligibility be given under an intrafund advice model; and
- The advice can cover the members household, i.e. spouse/partner of the member and if applicable, dependant/s of the member.
“ASIC can facilitate this using similar regulatory tools to those which it used in its COVID-19 measures to allow intra-fund advice on early release of super to extend to a members’ household.”
The ISA submission also urges greater flexibility around the use of general advice and the provision of clearer definitions by ASIC.
“Industry superannuation funds use general advice to help members navigate the retirement income system and to better understand their options. They provide a wide range of services which go beyond the delivery of factual information to members. Generally, the services take the form of seminars, electronic direct mail, fact sheets and newsletters,” it said.
“General advice provided by funds can also be a stepping-stone to more comprehensive personal advice. However, uncertainty surrounding the dividing line between personal advice and general advice – as highlighted by the current litigation by ASIC against Westpac Securities Administration Limited and BT Funds Management limited and enforceable undertakings from the Commonwealth Bank of Australia and Australia and New Zealand Banking Group – mean some funds are less confident providing general advice to members.”
“This regulatory uncertainty needs swift resolution. Various inquiries and ASIC’s own work have shown that consumers generally do not understand the meaning of general advice, and recommendations have been made that it should be ‘re-labelled’,” the ISA submission said.
“However, this ignores the value of general advice if its limits are understood and the motivation for providing it is in the members interest, and not to switch or sell superannuation products. That is, if the reason for giving general advice is to assist members to better understand superannuation and how to obtain good than the content is unlikely to assist ASIC’s overall objective of making advice more affordable for consumers.
“General advice can be an efficient way of providing valuable advice to large numbers of members cost effectively. ASIC is encouraged to clarify and expand its guidance on the difference between general advice and personal advice so that funds have greater confidence in using it appropriately.
“…general advice should not be used to sell superannuation products or to switch members out of an existing fund and into a new fund.”