POWERED BY MOMENTUM MEDIA
Industry funds canvass three-way advice fee split
Industry superannuation funds are asking whether it is possible to split advice fees into three components, one of which is intrafund advice.
In a discussion paper forming part of Industry Funds Service submission to the Australian Securities and Investments Commission’s current advice within superannuation project, the industry funds body has openly canvassed whether it is possible to split statement of advice (SOA) fees into three components.
It listed those three components as “(part intra-fund, part fee deduction from account, and part payable directly by the member)?”
In asking the question, the IFS document has argued that “a full retirement plan may involve advice on investment choice (covered by intra-fund), contributions and pension recommendations, including Centrelink, that we charge the member via a deduction from their account, and a non-super investment recommendation which the member needs to pay from their own funds, for example”.
“What is the expectation of a fund to accurately cost their advice in order to set their advice fees?” It asked. “Further, for advice that goes beyond intra-fund, how is it to be determined what the costs of those elements are in achieving cost recovery?”
The IFS document has pointed to areas where the organisation there needs to be more regulatory guidance and clarification and specifically asks whether retirement advice can be provided as intra-fund advice.
“This is where we see the biggest contention from the broader advice industry, and the widest variance of interpretation amongst super fund,” it said. “Some funds provide near full retirement planning advice under its ‘intra-fund offering’ and remain silent on advice relating to other products or a spouse. Other funds do not provide retirement advice in any form on the basis that it isn’t simple and cannot include strategies for a non-member spouse.”
The IFS paper also asks whether the charging rules have such a significant impact on how advisers are licensed, and hence which members needs are addressed and states that, “more fundamental is whether the use of limited licensing to align to intra-fund charging rules is creating challenges for advice models and advisers i.e. the scope of needs rarely falls neatly into one charging bucket. The limited adviser needs to assess whether the member sufficiently understands the impact of only receiving limited advice and then determine if it’s appropriate to proceed with giving it.”
“This is a growing conflict for limited licensed advisers who often need to operate at the limits of what they are allowed to do, yet are qualified and capable of solving for more,” the IFS paper said. “Further the member’s expectations are for them to address their superannuation and retirement needs. Limited super licensing is not something that a consumer should be expected to understand. Instead advisers should be licensed to solve for super and retirement and scope up and down as required.”
Recommended for you
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
Cbus Super has unveiled Advice Essentials Plus, a new service offering affordable financial advice to both members and their partners.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
