Speaking before the commission, Mr Kell said there were “eight entities”, some of which may have more licensees under their umbrella, which have engaged in ‘fees for no service’.
In a statement issued following the revelation, First State Super said the misconduct related to its StatePlus financial advice subsidiary.
“Financial advice company StatePlus has apologised for an oversight that resulted in some clients being charged a fee for an annual review they did not receive,” the statement said.
Bendigo and Adelaide Bank also issued a statement acknowledging Mr Kell’s testimony.
“The Bank disclosed this issue in its submission to the Royal Commission and continues to work closely with ASIC to agree the appropriate remediation actions,” the statement said.
YBR did not respond to requests for comment.
Follow the royal commission financial advice hearings live with ifa here: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
My mother questioned StatePlus / First State Super a couple of years ago about why she was charged an advice fees, when all she received was a telephone call and even that was missed in one year. She was advised it was a compulsory fee for the product she had. It was not a super account or pension account.
[quote=Trish S]So when is this going to become main stream news. Journalists are very happy to pounce on Financial Advisers and make us all look like crooks, while the Industry funds just keep ripping people off daily with the lies and innuendos! Then when making a claim they have to engage a solicitor to take maybe 40% of the proceeds because they don’t have an adviser to help them….AS PART OF THEIR ONGOING SERVICE! [/quote]
At the height of the great agriculture investment scheme fiasco, accountants were the main pushers of the schemes, pushing the tax deduction and raking in the 10% commission. They were floggers first, accountants second and “advisers “only because they needed to be licenced to sell those products. Yet the media always referred to these people as “advisers”, and the rest of us suffered reputational damage. Those bas……..ds were bloody accountants !
All these findings coming out from the RC about vertical integration, BOLR and fees for no advice are well known by ASIC, FPA, AFA and everyone in the industry. The reason this has been allowed to go on and will continue to go on, is that the Big Banks and Product Companies have always had the advice profession captured. They have been able to this with their political and financial power. It’s capitalism and these big businesses that run our country; not the government. This will all get washed away in the senate or kicked further down the street or re-engineered to suit the big end of town, who have all the power; like it always has and will continue to do so…unless the world decides that capitalism is no good anymore?… I don’t think so! We all know this wrong! but it is just the way the world works and how the majority of human beings treat each other. Rich or Smart people get all the money, so Poor or Dumb people lose all their money.
Public submissions to the Royal Commissions are still open to the public via the official website. If you have an issue with Industry Super Funds and vertical integration submit your concerns, I have twice now already.
If this is truly the case why isn’t an ISF representative giving evidence at the Royal Commission? They get a guernsey for the superannuation hearings but they also give advice in a vertically integrated world.
Spot on jape look at the support staff and leadership in many dealer groups and you will find a huge skill gap issue
In fact there are only one or two in the industry that have the knowledge
Perhaps this could be the reason Aleks
Another FPA member firm in the headlines. That CFP brand is increasingly becoming like a rotten smelling fish.
Isn’t the ultimate “Fee for no service” the industry funds that charge everyone an admin fee to provide advice for those who elect to take it up? No disclosure, no opt-in, no choice and most never use the “service”
There is serious cross-subsidisation going on in Industry Fund land given the number of people they are seeing and the level of fees they are raising, the numbers just dont add up. The cost of ‘advice’ from an Industry Fund planner is kept artificially low with subsidies from the funds themselves to justify the members keeping or rolling over their other super into the house product. How is this any different to AMP or the 4 Big Banks? ASIC expressed outrage, disgust & dismay that two-thirds of clients advised ending up in the house product. I would venture that over 95% of people seeing an Industry Super Fund planner ends up in an Industry Fund. How is that not vertical integration? How is ASIC not looking at this? Is it just because ASIC have a blinkered view of the world? They believe the crap advertising campaigns? Idealogical bias?
Do Industry Funds get around this by having 3 industry super funds on their APL’s??? Is that how they do it??? And u can get insurance from anyone you want as long as it’s from those 3 funds?? How can any right-thinking adviser recommend a client/member take out cover with Australian Super? It’s a disgrace that there hasnt been an investigation or report into the changes they made to members re their insurance cover and the fact that it was done to facilitate the onboarding of new members at the detriment to existing members. Trustees owe their duty to existing members. You cant prejudice the rights of existing members because you’re in an arm’s race to be the biggest fund in the country and to gobble up and squash all opposition.
I dont want to defend industry funds but the planners at IFS actually recommended external, retail cover with commissions wound down from what I have seen. Regarding the fund itself, I agree 95% would be in house so its really quite similar to the banks/AMP.
Stateplus runs the typical AUM business model. Charging someone 0.85% for a multi manager portfolio. From a AUM model it works well but from an advice perspective it doesn’t work well if you take on every Man and his dog. Hence the focus was always on FUM & AUM as opposed to the adviser client ratio. Large clients get serviced and the rest as AUM decrease get shoved off to no man’s land and end up 100% growth because their pension payments are drawn from conservative options first. It was only a matter of time for Stateplus. This lack of client servicing appears to have been declared only when First State Super model took over Stateplus business recently and they got off easy because they came forward. I suspect within First State Super it would be significantly worse.
Common knowledge- charge the fee and the client can call the- you guessed it- the call centre for their advice. LONG time over due that this practice was called into question. And who pushed the policy–MANAGEMENT. Wonder if the RC will wake up to this fact and cleanse the culture and the management who directed the course of action. Guess which one.
Hmmm, not sure that is exactly the issue here. My understanding that First State Super Advice charge based on fee for service (pay as needed).
However their sister advice firm StatePlus charges a percentage based ongoing service fee (see FSG), also they have 60,000 members and about 150 advisers (as per their website; many are CFPs). StatePlus a victim of their own success – not enough advisers to deliver the promised ongoing service.
Happy to be corrected if necessary.
Related, I wonder if for many licensees grandfathered fees (v service) will become an issue under the RC?
My comments relate directly to one of the big 4 where management openly told advisers to chase new business over servicing
Fair enough, your concern makes sense. How else will those overpaid managers earn their bonus? Yet the moment they get made redundant, many struggle to find a role elsewhere – not too many such roles and their skills are not that transferable, hence their desperation.
I don’t think so because one is claimed to be a marketing expense (the grandfathered commission) paid by the fund manager whilst the fee is a private arrangement between the adviser and client.
Correct re the State Plus model being different to First State. State Plus charged effectively the trail out of their product.
Wonder why there was an incentive to keep signing up clients that couldn’t be serviced…$$$$$$’s.
Variable remuneration structures linked to a sales culture and enforced by management results in what we are seeing unfolding.
Not so much bad advice, bad financial advice business structures trying to get too big a slice of the superannuation pie, but telling themselves that everyone needs ongoing advice.
First State Super most likely under sub-entity StatePlus which was recently fined just under $1 Mill by ASIC for this issue.
Time to rethink the whole advice area, get the banks out of it and let accountants give more advice eg why not put the excess cash into an interest bearing account, as they know their long term clients short and long term affairs already in preparing their financial accounts and tax returns
No. Accountants have no business being in the financial advice space. Very different disciplines.
Ha ha, you are sooo funny not Polly
Most accountants work purely as scorekeepers for the last years tax return. How many clients would most of these ‘trusted professionals’ have if it wasnt for government mandated tax & BAS returns? When many complain about not being able to get clients to opt-in for business consulting or management accounting work, choosing basic compliance work only, they should be greatful that they have the government forcing business in their doors.
Polly the majority of Australians get advice now from Accountants. That’s why the majority of Australians are on Social Security payments and the busiest business in my neck of the woods is the local Soup Kitchen. Don’t get me wrong it’s just that you can’t get advice in a 15 minute tax return meeting. The Accountant does not know the persons long & short term affairs, they only know the “income” made from the asset from a data match via the ATO. They look backwards and what happened. The Accounting firm I worked for had sales targets for “selling” SMSF. A planner will motivate, inspire and find out spend time discussing the future. If paying out debt or building a cash reserve is the solution then a planner will recommend it. The solution is to make independent advice more available to all Australians.
I audited around 500 accountants giving FP over the years..no real idea, and just rely on the licensee to give them template, select funds etc. You don’t know what your talking about…
and this is exactly the reason, pure ignorance and probably a measure of arrogance in not even attempting to properly look into things.
Accountants already provide lots of investment and superannuation advice. They are constantly telling their clients to negatively gear property, and establish an SMSF. Why? Because these things generate ongoing accountancy fee revenue.
Too bad these things are actually inappropriate for most people.
So when is this going to become main stream news. Journalists are very happy to pounce on Financial Advisers and make us all look like crooks, while the Industry funds just keep ripping people off daily with the lies and innuendos! Then when making a claim they have to engage a solicitor to take maybe 40% of the proceeds because they don’t have an adviser to help them….AS PART OF THEIR ONGOING SERVICE!
Very true Trish and this has been happening for years. The industry funds have very cleverly kept below the radar and even run that disgusting and misleading “compare the pair” campaign while all along ripping off their members.
Hear hear!!!
And this is a surprise ?????
Yeah you are right. It is not a surprise when an advice business is run by people with no advice experience or qualifications. So how would they know what they need to do to comply with the law? Pity the poor Advisers working there and reporting to these epic Clowns.
Actually most of the management within the advice business at First State Super come from an advice background. Don’t let the facts get in the way of a good rant though.
Right so FSS have appropriately qualified people and still got it wrong? Is that your point? If so, that’s even worse.
As others have pointed out – the fees for no advice likely relates to StatePlus which has been acquired by First State only recently and was self reported when discovered.
And advice businesses across the spectrum (including boutiques and independents – both self licenced and dealer group aligned) have multiple managers and advisers who have consistently made poor decisions – so I am not sure what point you are making here. Any authorised representative who thinks the problems in the industry is solely, or even predominantly, at the feet of management is kidding themselves.
Actually you are kidding yourself. FSS was not mentioned by me but only in the susequent reply post and I could care less. That aside, the Management get paid to manage and so they are responsible and accountable. In the world you would make, all problems are due to Advisers which is false. The pressure Advisers are under to keep their job and achieve questionable corporate objectives – as presented by their equally questionably qualified and incentivised Managers – IS the big issue here with advice quality.
This just means currently the bar is very low to be qualified as a financial advisor/planner. The standards need to be lifted so only competent people can be qualified.