According to the Roy Morgan Superannuation & Wealth Management in Australia report, seen by ifa and due to be released next week, the number of professional advisers recommending their clients switch to industry superannuation funds has almost halved in just three years.
“There has been a decreasing trend for financial planners and accountants to direct switchers to industry funds,” the report states. “In 2011, 18 per cent of people switching through an accountant or financial planner were directed to industry funds, and in 2013, this has decreased to 10 per cent.”
The figures for industry fund recommendation pale in comparison to retail funds, into which 50 per cent of all superannuation products switched through a financial adviser flowed in the 12 months to June 2013.
“This reflects the continued importance that the major retail funds place on their network of aligned advisers,” the report states. “A further 25 per cent of funds were directed to other retail or corporate funds, while industry funds received 10 per cent.”
However, according to a long-serving boutique financial adviser, speaking to ifa on condition of anonymity, the numbers should not be considered low but surprisingly high.
“I am surprised the survey results are as high as Roy Morgan says,” the adviser said. “I’ve never met an independent investment adviser that would recommend a union fund, because their funds will not come clean on their actual holdings or internal [funds under management] fees.”
Industry funds exhibit a lack of transparency that make it difficult to fulfil FOFA’s best interest duty, the adviser said – in stark contrast to Industry Super Australia chief David Whiteley’s comments that recommending industry funds is actually conducive to meeting the fiduciary duty.
Commenting on the findings, Financial Planning Association chief executive Mark Rantall told ifa that readers should not be too quick to judge the reasons for the drop, suggesting the growth of SMSFs may have played a role.
Mr Rantall said he hoped the results were not in response to “campaigns” by industry super lobbyists or any acrimony between the sectors.
“It doesn’t serve anyone to have any particular sector be at war with the other,” Mr Rantall said. “I think at the end of the day, an industry fund is a product in the way a retail fund is a product and what’s important is the role the financial planner plays in determining the suitability of a particular product for a client’s needs; the critical thing is that advice is in the best interests of clients.”
PB spot on. I’m not surprised by the above remarks from Mr Rantall given the FPA has effectively been asleep at the wheel for 10 years.
Mark Rantall’s concern for the plight of industry funds is really touching especially in light of the decade long “war” that ISN waged on financial advice. They should thank their lucky stars that they have a monopoly on the CFP moniker or the FPA would go the way of the dodo
Pavel, give your money to unions if you want, mine’s not going there, nor any of my clients for that matter.
Get over it!
What a surprise! Surely their constant criticism of advisers, and their lack of transparency and research wouldn’t have anything to do with it? Would it?
You reap what you sow!
Come on…it’s not rocket science. The answer lies by and large in sentence one, paragraph 5. “Aligned advisers” (BTW, are these advises ‘professional’ as this term seems to be used interchangeably with ‘independent’ in this publication) supping from their owner’s wealth products – wow, who’d have thought it!!
The rest of this article is gumph and static.
And it goes on. Now the funds return an average of $25K more.
Another number that has no support. If we put it a SOA ASIC would come looking for us.
I still cannot see where all the money spent on advertising comes from, the members of the funds?
It’s unreasonable to expect advisers to not have at least some residual resentment over the ISFNs negative campaign, and this is only exacerbated by a closed-door communication policy. Even the ISFNs current campaign still hints at an ethical divide between them and everyone else, which suggests that attitudes haven’t really changed within their organisation. It’s like North Korea gritting their teeth, and declaring their “open for business” and then being surprised at the lack of interest.
Yes, we recommend you rollover your super into a ‘Union’ fund especially as you get the opportunity to invest your funds in a new online news service that won’t make any money for you. Sorry, will lose money for you. That’s what they are, union funds. How are the unions travelling lately? HSU? AWU? AMWU? CFMEU? Would you want your money invested in a union fund?
At last a story about ISFN not written by the ISFN and low and behold it reflects what happens in the real world. In my mind and practice the negative campaign toward advice and advisers is exactly why I would struggle ever to discuss Union/ISF in a positive light. Their campaign has burnt me forever.
The other main issue in dealing with Industry Funds is they are not equipped to work with intermediaries and always go direct to the client with questions. We choose to deal with a number of Industry Funds for our clients where appropriate for them and have found this practice annoys our clients who are paying us an advice fee to handle their affairs and they quickly become annoyed with the Fund and ask us to make a change as a result. The problems are further exacerbated when insurance is involved as Industry Fund personnel seem poorly trained to understand basic queries and the third party group life Insurers the Fund’s use also ignore intermediaries most of the time and choose to bother clients directly again. Industry Funds need to develop processes and infrastructure to work with intermediaries in order to retain existing business and also attract new clients.