Yesterday, ifa exclusively reported that BT has reduced the interest rate it pays on cash held on its Asgard platform by 12 basis points, with a spokesperson saying it was simply part of a routine review of rates and pricing.
Reflecting on the news, one industry executive described the move as “gouging”, while another suggested it may be part of the previously-announced decision to eventually move all BT clients to the Panorama platform. Both spoke to ifa on condition of anonymity.
AIOFP executive director Peter Johnston told ifa that the Asgard platform may face additional liability issues relating to the change in fee structure.
“Considering Westpac are the only cash option for the platform, any advisers recommending the BT/Asgard platform will need to be careful the very best interests of their clients are taken into account when recommending this product,” Mr Johnston said.
“Over time, a [12bp] reduction in return can compound onto a significant loss for the client, something an adviser may be liable for if a client holds them responsible for the advice at a later date.”
He also suggested the rate cut reflects a prioritisation of shareholders over customers that is not keeping pace with activities key competitors MLC and the industry super funds.
“BT actions can only be described as a blatant strategy to increase shareholder dividends at the expense of investors,” he said.
“The recent move by MLC going back to being a mutual with the Nippon Life 80 per cent takeover is great news for current and future policy holders.
“The same can be said for advisers who prefer the member comes first culture of industry super funds, their MER and returns are generally superior to retail funds. This is fact that advisers cannot continue to ignore.”
We have this person stating ‘best interest’ for a cash interest rate drop & then comparing to member based industry funds. perhaps the truth needs to be made public above about industry funds. you have to ask the question how does an industry fund charge members $1.50 per week and continue to operate a sustainable business model? the reality is it costs whole lot more to run an industry super fund or any other super fund. the thing industry funds do not disclose to public or its members are their deals with investment managers to take cut of their fees, union deals in preference to direct member funds to union backed projects, taking a slice of the actual return members should recieve, defering to list up to date unit price to unit holders to hide or defer negative periods of performance. go back and look at what major industry funds did throughtout GFC period to disguse negative performance. at the end of the day their is nothing wrong being upfront about how everyone makes their money. industry funds should start disclosing to public & members the real cost to their members
Sorry, but in what world are advisers leaving LARGE amounts of funds in the working cash account for LONG periods of time? We are talking about the cash hub / cash account not a specific investment option, yeah?
I read the headline and wondered “Really? Which association would say such a thing?” and as I quickly scrolled down I could only think of one name and…there he is.
I’m getting really tired of the “Best Interest Duty” phrase being liberally thrown around to scare advisers. If that’s the case then mortgage brokers ought to be all chasing the lowest loan rates and advisers should all be jumping on last year’s best managed fund.
Did he seriously say ‘member comes first culture of industry super funds’? What an embarassing comment. He should speak to some advisers on the ground. Those of us that deal with these funds on a regular basis and see how they treat their members have a very different view.
I never realised Peter Johnston was such a blatant union fund spruiker. Has he been sighted in the union funds corporate box at the footy?
Really Peter Johnson!
If my client had $10,000.00 in cash that would = $12 pa reduced interest earnings and you say that I would need to be careful about being liable if a client holds me responsible for my advice at a later date.
I would suggest that I would have more problems if i was being held responsible for my advice at a later date than $120 to $150 of reduced interest earnings over a 15 to 10 year period.
You need to understand that a 12 basis point drop on the interest rate received does not = a 12 basis point reduction in portfolio performance.
I don’t even use Asgard at all and can still see that some associations are just grand standing for the sake of grand standing.
BTW, I am self licensed and would never ever be a member of the AIOFP for this reason.