Any fears that Michelle Levy’s recommendations will allow super funds to take over advice are misguided — industry super has been providing advice for decades. And the offering has become increasingly sophisticated in recent years.
Take a quick look at any of the annual reports of industry super funds and you will see that advice is now a core part of their business.
Australian Super members can access help and advice about super, investment choice, insurance and retirement planning over the phone, often at no additional cost, or they can choose to meet face-to-face, by phone or by video conference with a financial adviser for more comprehensive personal financial advice.
In the 12 months to 30 June 2022, half of all comprehensive advice by Australian Super was delivered virtually by phone or by video conference. More than 8,000 statements of advice (SoAs) were produced, an increase of 11 per cent on the previous year.
REST issued more than 19,000 statements of advice in FY22, up 77 per cent increase on the previous year. UniSuper had its best ever year in financial advice in FY22, with a 43 per cent increase in the volume of intra-advice provided compared to the previous financial year.
Cbus, which delivers advice via a referral agreement with the Financial Planning Association of Australia (FPA), was able to organise 631 interactions between its members and financial planners.
Hostplus provided personal advice to 3,700 members over the year. Along with Australian Super, it is one of a growing number of industry funds that uses licensee IFS Group to deliver its advice.
IFS Group is owned by 19 industry funds and provides advice licensing from general to comprehensive, digital advice tools and calculators, member education, advice issuance and audit, back-office technology, adviser education, paraplanning and consulting with industry funds on their financial advice needs.
“Australian Super advisers are licensed by us,” IFS Group chief executive officer Csaba Baranyai said. “When a member sits down with that adviser, as far as they are concerned, they are seeing an Australian Super adviser. But on all of the documents and resulting SoAs, it will state that the advice was provided by IFS Group,” he explained.
The dealer group licenses 120 advisers across 16 industry super funds and generates 7,500 SoAs per year. Mr Baranyai says there has been significant interest from retail advisers and IFAs looking to join.
“We are seeing strong growth both in the number of advisers and the volume of advice given,” he said. “We were the fastest growing advice licensee in 2022, which is very exciting. We are seeing new advisers joining us from both the IFA and retail space.”
Given the power of super funds to reach every working Australian in the nation, it is easy to see why they are being considered a major candidate for the delivery of affordable and accessible advice.
In previous years, vertical integration was seen as a problem. Today, as Michelle Levy stated in her final report, “vertical integration is part of the answer”.
The Quality of Advice Review (QAR) recommended that super funds should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.
“In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice,” the report recommended.
“Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.”
Mr Baranyai says super funds will play a much bigger role in making advice affordable and accessible over the coming years, whether the QAR recommendations are legislated or not.
“Super funds are best placed to deliver that affordable and simple advice to mass market Australia. They are already doing it. The issue at the moment is scale,” he said.
“But we are confident that with the right service models that leverage rapidly evolving technology, we are really close to cracking the code of putting retirement-focused financial advice within reach of everyday Australians at scale,” he said.
Hybrid advice is the aim of the game for super funds, which means more financial advisers will be required to support members.
“For us, it is really important that we have an alignment of values,” Mr Baranyai said. “We are always open to working with IFAs as long as we can do it in a way that maintains that value alignment we have with our profit-to-member ethos.”
There’s a lot of advisers on here feeling threatened but the bottom line is that super funds service members you don’t want to see because they can’t pay your fees. Why can you all concentrate on your target market – people that can afford $2-$10k per year and let these advisers charge low fees for simple scalable advice. Let’s not be childish and work together so that every Australian can get good advice shall we?
What alternatives can you offer outside of the super fund who pays your salary super when these alternatives are in best interest of clients ? Just asking….
Or perhaps make advice more affordable by removing unnecessary regulations that drive up cost? You understand both could be done and it would assist clients greatly. But there only seems to be a focus on allowing super funds to provide low quality conflicted “advice”. It is not childish to point out an obvious way to improve the outcome for all clients.
So the poor can get conflicted advice – no issues with Conflicted advice for these poor people? Seriously, other than being poor, is that the justification?
All non-for-profits and super funds should be running a separate Financial Advice entity which runs a separate P&L where advice fees are collected, advice staff wages, and operation costs are funded. This would result in fair market pricing for advice with no cross-subsidisation. This should be APRA regulated so they don’t go dipping into the honey hole to fund advice. We want an even playing field and not an unfair distorted one.
Seems awfully unlikely given they’ve spent the last 20 odd years and many millions of their members’ dollars telling everyone who will listen that there is no value in advice.
How is this any different from Commissions – a Product Provider paying a Financial Planning practice – ie, like AMP Life paying AMP Financial Planning Firm ABC?
And where are all those ethical lecturers – act in the spirit of the law – above and beyond? Looks like getting paid from the Admin Fee of a product is Ok?
What products do they recommend? Perhaps the Liberal Party could answer this question?
Having just sat the Ethics FPC002 exam this line jumped out.. incredible. “When a member sits down with that adviser, as far as they are concerned, they are seeing an Australian Super adviser. But on all of the documents and resulting SoAs, it will state that the advice was provided by IFS Group,”
Vertically owned Advisers providing in house product only sales Advice and paid for via Hidden Commissions charged to All members when 90% get none of the sales Advice.
COMMISSIONS FOR NO SERVICE.
Wow just wow.
Ain’t it grand that Industry Super now loves Vertical Integration, Vertically owned Advisers and COMMISSIONS !!!!
Hypocrisy gone bonkers !!!!!!!!!!!!!!
If you can’t beat them, join them. I’ve reluctantly moved to a fund role. I do half the duties I once did at an outdated traditional firm, speak with 3x more clients and get paid much more handsomely.
I recently recommended the client use one of the above industry super funds and made some enquires. The client came back to me and said they had a call from the Super fund saying “you’re obviously looking for advice” ..so to use the clients words…”I thought it was a bit low they were trying to poach us and get us to us when they learned we were using an external adviser”…. Working as an Adviser in a Super fund I am 110% convinced the sales tactics of Industry Super funds will make the banks look like amateurs and yet we’re set to repeat the mistakes of the past.
As an Industry Fund member, can I make a FFNS claim to ASIC / AFCA and get back my 10 years worth of fees charged to my account where I didn’t receive any advice or service?
Compare the Pair. Industry funds, keep valuing your large unlisted allocations off-market (i.e. not marked to market) and tell us how great your returns are! Then if there is a liquidity mismatch, get APRA to force another fund merger. Even better, keep increasing the SGC and redefine the purpose of super to suit funds’ interests ahead of members.
How many advisers does REST have if they can produce 19,000 statements of advice? It wouldn’t be cookie cutter advice would it?
In addition, has ASIC actually looked at the quality of advice from these super funds? ASIC seem to be more focused on private licensees.
I’d suggest ASIC take a look at that advice and ensure these advisers are operating under their BID obligations and are comparing other products when providing advice.
Apparently clients are getting “free advice”. Can members of these funds elect to be in a division which does not subsidise the cost of advice that other members are receiving? Sounds like some members are unfairly subsidising the cost of other members. Why not a user pays system?
How is IFS valued by Industry funds? Is it an asset that the fund members own within their asset allocation? If so, is it profitable? If it is not profitable, would this holding, if held by the members, be in the best interests of members?
I think we might have different definitions of what constitutes ‘financial advice’.
Product providers providing product pushing advice to invest into their own product and own IFM funds.
Sure, ASIC, no conflict of interest and vertical alignment influencing advice, like you persecuted the banks and other institutions for, is there?
How them corporate box tickets and gifts going? Ever going to publicly release your register again?
No kickbacks from the unions or ex-Labor politicians all now sitting pretty on industry fund boards, sucking fat fees from member funds?
“Nothing to see here”, said the fat corrupt pig of a cop.
Seems Industry Super was left out of the Royal Commission – why?
Conflicted trash talk…..when only circa 12% of super members use a service but 100% fund it Hon Hayne would term it fees for NO service. Ms Levy views are also conflicted considering she was appointed by a Liberal Bank Loving Minister…..just stick to your knitting Super funds, if your fund is any good it will get market support.
KPI’s, targets and cookie-cutter advice. No thanks. IFS advisers will be the first on the chopping block of AI.
thats why Jones has gone soft on SOA !!
So let me understand this better, the whole FOFA legislation and Royal Commission was focused on banning vertical integration because it was seen as a conflict of interest. Now Levy says that vertical integration is “part of the solution” and should stay.
So I’m guessing that the next move with the Big 4 will be to re-enter the insurance and platform space again? Then what, in another 10 years we will see all the conflicts of interest restart with another generation of planners facing the same problems.
How laughable this whole thing has become, 10 years later we are all back to the start of where it all began, but alas, with half of the industry now wiped out or taken early retirement, we have passed numerous “ethical exams” and higher education which should rid all the pre-FOFA problems we were facing, yes?
Maybe it would be good for ASIC to look at these thousands of SOAs provided by union funds and see how many times a recommendation was made to use an alternative fund other than the union fund providing advice. Or does conflicts of interest only apply to everyone else?
Vertical Integration is alive and well – as displayed by ASIC’s and the Govt.’s 2 sets of rules.