In an email to members of Parliament, Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston said that the legal action is yet another reason that institutions “should never be allowed to participate in the financial advice space again”.
Last week, the Federal Court heard MLC members were charged fees and premiums to their superannuation accounts between 1 July 2016 and 23 September 2020 to fund the commissions “given in full” to financial services licensees.
Counsel for the group members said the commissions “came with no requirement for advisers to do anything” in exchange.
The class action has been brought against NULIS Nominees, a trustee for the MLC Super Fund. Until its sale to IOOF Holdings in May 2021, MLC existed under National Australia Bank (NAB).
In this ownership context, NULIS allegedly “ripped out” $165 million from members and only stopped a few months short of a “hard ban” introduced in the January 2021 legislature.
In an example provided to the court, NULIS charged a “contribution fee” which was “not a fee for any work or effort by NULIS in the administration or operation” of the superannuation fund.
Writing to MPs on Monday morning, Mr Johnston said: “It should also be noted that this blatant ‘extortion’ from consumer savings was carried out by institutional management teams (NOT financial advisers) where they are paid generous bonuses for the profitability of their divisions, a clear conflict with the best interests of consumers and it can be argued it is just another form of product-related commission which was banned under FOFA in 2012.
“The irony of this unpalatable conduct are consumers have been paying twice in the past, once to the institutions for their deceit and then again with higher advice fees imposed post-royal commission when commissioner Hayne recommended additional compliance measures to counter this institutional conduct in his final report.
“Ridiculous consent forms and other repetitive and unnecessary paperwork has doubled the cost of compliance over the past seven years and consumers are paying for it.”
Mr Johnston added that adding to the “insult” was that most of the institutions have left the advice industry “in disgrace”, yet the measures to end these practices are still in place.
“Unfortunately for consumers and financial advisers, the distinction between advice and product manufacturing has been constantly confused by politicians and bureaucrats where historically, advisers have been unfairly blamed for the actions of others allowing the real perpetrators to avoid accountability,” he said.
“We are pleased that Canberra is now differentiating and understanding the nuances between the role financial advisers and product manufacturers play in the industry and why institutions should be forever banned from offering professional advice to consumers.”
Adding that he believes this is separate to the government’s current push to allow super funds to have internal staff trained to give internal product and related information to consumers without being licensed, Mr Johnston said the AIOFP “agree with this direction”.
“We, however, vehemently disagree with the QAR recommendation that the best interests duty should be replaced with a ‘good advice’ concept which allows institutions back into giving consumer advice despite their profoundly conflicted vertically integrated business models,” he said.
“This is a very bad outcome for consumers in our view. Poor historical data supports our view.”
Well said Peter but as usual, with these agenda and ideology driven – not ethics and integrity driven politicians, you can bet your words will AGAIN, fall on conflicted and deaf ears!
What about aware super fees for no service of over $150b?
TV Advertising super advice and super returns I believe? Conflicted advice much?
“…not a fee for any work or effort”
In that case, Australian taxpayers should sue politicians, public servants and judges for their extremely generous retirement pensions. They often receive hundreds of thousands of dollars every year and the taxpayer gets absolutely nothing for it. It’s time for this hypocrisy to be dealt with once and for all.
Mr Johnston, you are assuming they give a damn about us (advisers).
Amazing how the passage of time distorts historical fact and reality. Add to this the fact that the majority of former practitioners – essentially self-employed Life Insurance Agents who were the on-the-ground sales force responsible for ‘bringing in the business’ by insuring the Mums & Dads of Australia – were remunerated by commission-only. That commission was paid partly upfront and partly spread over the term of the policy, provided the policy stayed on the books. To say that it was ‘not a fee for any work or effort’ is a blatant contradiction of the fact that the work had already been done and the payment a part of the contractual ongoing entitlement of the Agent for services already, and continuing to be, rendered. The fact that the Life Office pocketed the renewal commissions after the Agent had departed is another matter – and unquestionably an issue.
As one who built up, brick by brick, over 35+ years, a successful, Client-serving business based on those small renewal commissions, but had them eliminated, and my practice mutilated, by an industry deferring to ASIC’s destructive regime, I can attest to the reality. And I am one of thousands.
I also contributed generously to Mr Johnston’s valiant, but vain, attempt to save those renewal commissions.
Let’s stick to the facts.
There was nothing about it that was unconscionable about it. The law is the law. If you don’t like it change the law with an earlier start date.
Agreed Peter / AIOFP, the huge majority of the RC Fees For No Service scandal had nothing to do with Advisers and these clients often charged had No assigned Adviser.
So how many of the Banking / Institution managers, AFSL RM, Executives, CEO’s, Super Trustees, etc [b]were ever charged for ALL this THEFT ? [/b]
So how many of the Banking / Institution managers, AFSL RM, Executives, CEO’s, Super Trustees, etc [b]were ever public shamed for ALL this THEFT ? [/b]
So how many of the Banking / Institution managers, AFSL RM, Executives, CEO’s, Super Trustees, etc[b] were ever Banned for ALL this THEFT ?[/b]
The advice from an industry fund may be more reliable.
Aware super had massive fees for no service and maybe read ASICs report 639 on industry funds. Their advice is just as bad if not worse, it just goes unpunished
Was reliability of Advice ever the issue raised by ASIC? Seems to me it was “conflicts” – conflict this and conflicted that leading to potential consumer detriment. Financial Adviser were then seem as unethical because we were conflicted – and had to be sent off to the Communist Re-education camp (or FASEA as they call it) and do more degrees as we were uneducated idiots – IMO. Follow the money and a lot of it is now at Industry Super it seems. You reckon Industry Super would put the individual interest ahead of the interest of the Billions in FUM? Reliable – at protecting FUM I would say yes – but I could be wrong?
Agree completely
Selling an overpriced, underperforming product to meet targets (or just keep your job) doesn’t even meet even the low “good advice” standard. Just a matter of time before class actions start and maybe another Royal Commission.
Any idea how those unlisted assets are performing now and what the future might looks like?