While the latest guidelines around the FASEA code, released on Monday, confirm that intra-fund advice is allowed under the standards, they also stipulate that advisers must only provide intra-fund advice “where appropriate” in order to conform with Standard 6, which relates to the broad effects of advice on a client.
Further guidance around Standard 6 states the adviser should “make an independent, professional assessment as to whether scoping the advice is in the best interests of the client, and not just in accordance with their preference or instruction”.
In a recent client update, law firm Mills Oakley argued that these guidelines, as well as previous guidance that intra-fund advice would only conform with Standard 2 on best interests if the adviser “exercised professional judgement on whether a limited scope engagement was appropriate”, could put intra-fund advisers between a rock and a hard place when it came to code compliance.
“In combination, Standards 2 and 6 may require advisers to scale up their enquiries even though they are necessarily scaling down their advice to meet the intra-fund rules,” the firm said.
Intra-fund advisers were further at risk of breaching Standard 3 around conflicts of interest if the trustee of the fund they were working for had not sufficiently managed these conflicts through their compliance processes, Mills Oakley said.
“Advisers will be tested if their trustee employers use intra-fund advice as a member or FUM retention tool,” the law firm said.
“Trustees need to ensure advisers are equipped to comply with Standard 3, for example with an SOA template for advice to not make a contribution or advice to take advantage of the COVID-19 early release program.”
The law firm pointed out that an ASIC report released in late 2019 had shown two-thirds of fund trustees providing advice didn’t have a conflict management program in place, indicating this could be an area of vulnerability if regulators turned their sights to intra-fund advice.
“ASIC asked the funds about what they thought were the key conflicts of interest for their advice business and their approaches to conflicts management,” Mills Oakley said.
“Only 29 per cent referred to the use of a conflicts management framework in their responses, which was lower than anticipated given that APRA’s Prudential Standard SPS 521 requires all super funds to have a conflicts management framework in place.”
Mills Oakley said while ASIC had yet to take further action on the results of the report – which also revealed about half of advice given by super funds may not be compliant with the best interests duty – the increasing polarisation of political debate around super meant funds could not rely on this state of affairs to continue.
“Trustees cannot afford to relax on intra-fund advice … [it] is associated with industry funds and so is a politicised issue,” the firm said.
“The chair and other Liberal Party members of the [House] economics committee that oversees ASIC will ensure ASIC is accountable on the quality of intra-fund advice.”
I have little dough ASIC will bend over backwards and allow whatever it takes for Industry Super to retain Intra Fund Advice and the associated ongoing fees to provide advice that is not ongoing. Little risk of that.
The whole industry is unworkable
How is this even a question? Resign Glenfield and take your cronies with u.
No intra-fund advice can possibly meet standard 5 and 6 of the code. I.E no reasonable grounds for recommendations and no regard for broader implications of advice. From what I have seen all industry TTR arrangements are done a wink, wink, nudge, nudge arrangement – with no regard for the individuals circumstances.
All financial advice for reward breaches the FASEA Code, whether fee for service, AUM based, or commission based.
Standard 3 states that all conflicts must be avoided. Any form of reward is a conflict and is therefore a breach of Standard 3. It doesn’t matter what the FASEA guidance says about this, it only matters what the Code says. FASEA doesn’t enforce the Code and their guidance is not binding on those who do.
Yep this FARSEA is completely Unreal and Unworkable as it’s been written.
And their pig headed Unethical attitude must fail.
Standard 5 and 6 are also completely Unreal in the Real Advice world.
ASIC provide their interpretation on the giving and collectively charging for intra-fund advice.
” Intra-fund advice refers to the types of advice that a superannuation trustee can continue to provide a member with simple, non-ongoing personal advice on the member’s interest in the fund and that advice can be collectively charged across the fund’s membership”.
” The types of advice for which a superannuation trustee is likely to be allowed to collectively charge, where the advice is not ongoing, include advice to a member about:
* the extent of cover provided by the insurance arrangements that apply to the member’s interest in the fund and the types of cover that may be suitable to them
* increasing contributions
* changing investment options within a fund
Please note this is not an exhaustive list.
You are restricted from collectively charging members for various types of personal advice.For example, you cannot charge across the membership of the fund or any other member(apart from the advice recipient) for types of advice that are likely to be more complex and ongoing in nature.
Where one or more restrictions apply to an advice situation, the member who receives the advice should incur the cost of that advice, rather than the membership of the fund as a whole or any other members. The receiving member must bear the cost of the advice and it is prohibited for any other member to bear the cost, directly or indirectly.
……If you offer a transition to to retirement (TTR) strategy, you might not be allowed to collectively charge members for advice , unless the advice is given for a related pension fund and is not ongoing. Superannuation trustees should carefully consider whether they can collectively charge for certain TTR advice, depending on whether the advice is ongoing and it’s complexity.Not all TTR advice can be collectively charged, particularly if it does not involve a related pension fund “.
The essence of all this is that it appears that changing investment options for a superannuation member is considered simple and not ongoing advice !!!
That assessing existing insurance cover and recommending the type and amount of insurance cover that is suitable to a member is considered simple and not ongoing.
That an analysis of an individual’s contributions and types of contributions including Concessional, Non Concessional, Spouse, Govt Co-Contribution, Salary Sacrifice etc is considered simple and not ongoing.
It also appears that TTR advice to a member can be collectively charged to all members if the advice is in relation to the TTR pension offering within the member’s fund and their is no ongoing advice !!
When would there ever be a situation where the recommendation of a TTR strategy to a client would not be considered necessary for ongoing and continuing advice to monitor, assess and review the effectiveness of the strategy in order to meet the client’s objectives.
The problem lies in the fact that important, complex advice that would normally require ongoing review and continuing advice is being allowed to be provided under Intra-Fund advice models and labelled as “simple, non- ongoing personal advice” for the specific purpose of allowing funds to charge every single member, rather than just charging the member who receives the advice.
There is a clear and obvious dilution of the definition of simple versus complex advice for the purpose of convenience.
This is wrong and this delivers superannuation funds a carve out regarding advice that normally would require a financial adviser or planner to provide a comprehensive advice process with a requirement for on-going advice as part of responsible advice requirements.
This situation cannot be allowed to continue in it’s current format.
But wait ASIC will never do Anything against their best buddies Industry Super.
ASIC’s Regulatory Capture has totally corrupted its bias to Industry Super.
It’s a disgustingly open and growing corruption in favour of everything Industry Super and against Real Advisers and Must be stopped.
ASIC isn’t the one to watch out for when it comes to FASEA (they don’t seem to accept that the code even exists).
AFCA is the one to worry about – they’ve stated they’ll use this code to ‘protect’ consumers. That’s where the business-destroying risk kicks in.
Could IFA improve the option to print or forward artlcles? At present when I hit the ‘save as pdf’ or print function, the last few sentences on the page don’t show up. Thanks
I have never seen so many people who are driven by consumer groups and perceived best interests ruin an Advice Industry so quickly. 99.9% of Advisers always try and do the best thing by their clients yet finding themselves double guessing themselves in everything they do. A phrase made famous in the movie Ferris Buellers Day off ” I weep for the future”…….
If someone was to walk into my office with $90,000 to invest with a low level of complexity I today would tell them to ring there super fund up..because of a) the process and b) cause of the cost of the advice. Therefore in turn if a typical retiree (with a medium level of complexity) walked into Stateplus or any industry super fund with $900,000 and the adviser wacks them into the StatePlus balanced fund or the Unisuper fund and charged them once off advice fee and said come back when you need advice…that advice would have to be not in their best interest, IMO.
This interpretation of the FASEA Code of Ethics by Mills Oakley now takes the total number of steps to give advice to avoid breaking the law to more than 40 and the cost of advice to be more than $3,000 per client/couple. When will government step in and stop this nonsense?
“Advisers will be tested if their trustee employers use intra-fund advice as a member or FUM retention tool,” the law firm said.”
Customer retention is the sole purpose of intra-fund advice. It’s a long bow, but the concept of charging to all members is based on the premise that retaining a large client base provides scale, lowers the collective cost and is therefore in the best interests of all members. If this dude is right, Industry Funds need to shed their entire intra-fund workforce immediately! Would be a good thing too!
Talk about over-complicating the situation. FASEA specifically says intrafund is ok. Advisers are simply required to make enough inquiries about the client’s circumstances to make sure that the intrafund advice they give isn’t harming the client (i.e. advising them to put extra money into super when they’re behind on $50k of credit card debt). It’s not bloody rocket science – just typical tortured arguing by law firms looking for clients.
No, the FASEA [b]Guidance[/b][b][/b] says intra fund is OK, but the FASEA [b]Code[/b][b][/b] says intrafund (or any other form of remunerated advice) is not OK.
The FASEA [b]Guidance[/b][b][/b] is a wishy washy non binding waste of time, the FASEA [b]Code[/b][b][/b] has legal standing and is enforceable by agencies other than FASEA.
BS, Intra Fund Sales Advice is a rort, with minimal to nil AFSL compliance and paid for by Hidden Commissions and majority of members paying fees for no service.
This rort must end and the playing field of advice leveled that All advisers have the same rules.
And that means supposedly following FARSEA, which requires far higher levels of inquiry than you suggest.
The only winners from FASEA’s Code of Ethics are lawyers. They are going to have a field day and this is just the start.
Come on Mills Oakley, industry super is a HUGE pot of gold, surely you can manage to launch a Class Action on this!!! please do this post haste
Typical of FASEA making it up on the go with no input from anyone that actually knows how anything in reality works. How about an independent review of the effectiveness and actual industry expertise of the “people” who run FASEA.
They haven’t made this up on the go – this 34-page opus took them 10 months to prepare.
10 months!