Industry needs debate around intra-fund advice

With a growing demand for the intra-fund advice, the industry will need to have a proper debate on what it represents in order to make sure that all parties involved fully understand it, according to Link Advice which specialises in providing advice for superannuation funds.

Link Advice’s chief executive, Duncan McPherson, said the discussion around the concept of intra-fund advice will be a growing trend across the industry in the coming months as members and consumers are starting to engage more with their retirement savings.

“We are talking to people who haven’t got large balance in super who actually don’t understand much of their super and what they are doing is they are talking to their super fund and we are helping them by giving intra-fund advice,” McPherson said.

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At the same time, according to Link Advice whose main clients included retail, corporate and industry superannuation funds, there was still a lot of uncertainty across the advice industry, in particular around regulation regarding intra-fund advice.

“We are regulated exactly the same as any other advice business, in the last 12 months in fact our business, because it worked with a lot of large superannuation funds, we’ve been through five audits by Big 4 accounting firms, within the last 12 months.

“They are looking at the business models and they are making sure that they are no gaps in their business models.”

According to Link Advice’s chief executive, there would be a growing advice gap due to a combination of the continuous exodus of planners, higher specialisation of advice businesses and growing awareness among the super fund members were more engaged with the plans around their retirement savings.

 “I think we’ve clearly seen a move to specialisation and one of the risks that the Royal Commission and the Australian Securities and Investments Commission [ASIC] even talked about is the risk of a growing advice gap. Because we are seeing an exodus of planners and as a result of this is there will be less planners despite more people wanting advice,” McPherson said.

Link Advice said this would hold true particularly for the traditional advice models which aimed to provide an advice on the broad range of topics.

On top of that, superannuation funds grappled with the regulatory attention and responsibilities for the advice provided to their members.

“Here’s the opportunity for advisers to really prepare themselves to work with the industry funds, and to understand the nuances of what the industry funds need to focus on to meet their regulatory obligations.”

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Prior to the RC all the corporate super providers had a very good avenue in which to provide intra-fund advice through the many small advisory businesses that are part of the WSSA (workplace super specialist Australia) . In a lot of cases we were remunerated on a per member basis and would attend employer workplaces as well as being available for members to phone the advisers directly to provide general information Where the initial general advice meeting went more into their personal situations members would then engage in personal financial advice process. Now that this arrangement has changed as ceased the product providers and in particular Colonial First State have ceased paying advisers and have taken the intra-fund advice in house. There has been an enormous fall out from these actions and has caused significant stress to small business owners of which I am one and the flow on affects to companies and their employees.

While I do feel for the many advice business owners, particularly those who (rightfully or wrongfully) relied on those IFA payments from product providers such as Colonial First State, it has to be said that the writing was on the wall. Call it what you will 'outsourced IFA' payment arrangements via product providers are still nothing more than commissions packaged up in a more palatable way. Oddly enough amongst his revelations towards retail super funds, Hayne did not probe in its entirety the convoluted Intra-fund advice model that some Corporate Super providers offer. In the instance where a company has 1000 default employees, interstate offices and/or remote workforce (think IT services) how does a small advice practice justify receiving a dollar per member payment when the likeliness of providing any sort of value add service to each and everyone of those members is minuscule? In the case of CFS, advisers had the option to continue to receive payments for retained benefit members (those that have left employment), this has obviously now ceased, but again how on earth can the delivery of any sort of service be justified? Many advice practices chose to cease access to these payments, but many could not overcome the temptation of this money for jam offer. The super industry is going through a monumental shift in how they engage and deliver services to members. The underlying fact and the fall out from the RC is that super trustees ultimately need to make decisions that are in the best interest of members...not financial advisers. Expect to see other soon to be non-bank owned funds follow suit...

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