FPA head of policy and standards Ben Marshan told ifa that while the charging of fees to all super fund members to subsidise intra-fund advice services was “a separate issue”, there was no difference in terms of advisers’ legal obligations regardless of who they worked for.
“In-house super fund financial planners operate under the same regulatory environment and comply with the same FASEA standards as all other financial planners,” Mr Marshan said.
“So from that perspective intra-fund advice itself is fit for purpose – there is no difference in compliance with professional standards, laws and regulations, even if the charging model could be reconsidered.”
The FPA’s policy paper, ‘Affordable Advice, Sustainable Profession’, released last month following member consultation, recommended that advice fee regulations be amended to ensure “a single set of rules” across all types of super accounts when it came to fee disclosure, renewal and authorisation.
“The rules should apply equally to all superannuation funds, accounts and investment choices,” recommendation 5.4 of the paper states.
“A single set of rules would ensure that no incentive is created for people to hold a particular investment choice, account or fund simply as it allows access to financial advice.”
Mr Marshan said the recommendation was in line with historic FPA policy, which encouraged advice fees to be paid up front rather than subsidised.
“The FPA Code of Professional Practice was updated in 2009 with our remuneration policy, which states consumers should pay for the advice they receive, not product providers,” he said.
“However, we also believe intra-fund advice is a great way for consumers to experience the benefits of a professional advice relationship and see the benefits of moving to an advice relationship with a holistic financial planner given the limitations of intra-fund advice.”
While calling for changes to fee rules, the association’s policy paper highlighted the importance of retaining super as a method by which consumers could pay for advice, saying it could reduce up-front costs by as much as 40 per cent.
“Superannuation should remain an option for all Australians when seeking financial advice on their superannuation and preparation for retirement,” the paper stated.
“In many cases … clients do not have alternative cash flow outside of superannuation from which they can pay for financial advice upfront.”
With Intrafund, most people are quite happy to receive financial advice for free. Only problem is that when only a small number of calculative retirees personally benefit this way, at the financial expense of millions of other super fund members, this advice “fee system”, supported by the FPA & Labor, is actually theft. The money’s for nothing, but the chicks are free.
he’s banging on the bongos like a chimpanzee…
Its fair to say, the FPA is a disgrace. An utterly corrupt, self interested, money chasing pack of whores. They sicken me.
Marshan has missed the point. Most intrafund advice is not actually delivered by licensed advisers. It is delivered by unlicensed, unqualified, staff from the fund’s sales and retention team. Super funds operate under a legal loophole which allows “general” advice to be given by any of their employees. And when the advice giver designates the advice as “general”, it is also not subject to Best Interests Duty or the usual disclosure rules.
In most cases the super fund’s unlicensed staff are actually providing personal advice, not general advice. But the super funds finesse the situation to get around the facts and squeeze through their legal loophole.
Bragg, Wilson, or Falinski need to delve deeper into this loophole. Union funds are by far the most active abusers of it.
Yes this point!
This is why it’s a disgrace.
Why do Advisers have to go through education, CPD, Licensee fees, PI, exams, and everything else, but a relatively uneducated superfund employee can give conflicted general advice via a loophole.
Because the Instos & the B&C grade fund managers (that they are in bed with) want the intrafund loophole to remain. What might surprise you is that there is no such thing in the Federal Law as “intrafund advice”. There is only General Advice or Personal Advice. Intrafund is simply mentioned as a term in the Explanatory Memorandum of 2013, but doesn’t actually exist in law. These “intrafund marketing reps” collect BONUSES, but you cannot. You are being scammed. Unless you kill this off, they will kill you off long term. Time to start the fight now.
The Industry Funds & Instos are up to their neck in it, & the FPA knows full well it is a total scam against professional independent advisers. The fact remains these fund trustees are collecting ongoing fees to pay for the advice needs of OTHER members without bi-ennial opt ins or informed consent from those members paying those ongoing advice fees. It’s an outrageous scam.
It is becoming very clear that what the FPA stands for is not the Independent Financial Adviser.
Maybe they see their future income stream changing and are just cutting off their fee paying clients (members) through simply not standing by them when they need them most.
When you have associations that simply do not listen to their members requests and then represent those requests strongly and with conviction…you have to question the value.
Why any IFA is still a member of the FPA is hard to understand.
Why be a FPA member ? Please explain ?
Are intrafund advisers now the majority of fpa members? Isnt the way members pay for subsidised advice and advisers renumeration in funds at the very crux of the issues we as advisers have with intrafund advice? But the fpa dosent see a issue with it, why is that? The fpa must have a lot of cash to spend on fences to sit on all day.
Yes, independent advisers have been being stitched up by the FPA & the instos for years now. Games up.
Most intrafund “advisers” can’t be FPA members because they’re not actually advisers. They are are mostly unlicensed call centre or “workplace” sales staff employed by the super funds.
Super funds do have some legitimate licensed advisers who are FPA members. But these advisers primarily provide comprehensive advice and charge the client additional fees for service. They service a tiny percentage of the fund’s members. The majority of super fund members who receive advice from their fund receive it from unlicensed employees, not legitimate advisers.
If you read the UniSuper Adviser Financial Services Guides, you will see that their large number of advisers ofter both Personal Advice, but are primarily funded via their intrafund salaries & bonuses (also mentioned in their FSGs). “Some” in Australia, is approx 1000 intrafund paid advisers. This is in addition to the admin staff that provide general information (ie hotline staff etc). And the Industry funds want you to think there are few of these advisers, but they are growing in number like rabbits, when you look at the official statistics. And why not – they have no opt-ins or informed consent forms to chase up every year, like independent advisers are forced to you. Independent advisers are being scammed.
I lost a client to Unisuper a while ago. The couple were fairly complex due to shares, property and tax issues in the UK as well as good incomes and assets in Australia and mental health issues that came up after underwritting of all policies.
The Unisuper adviser focused on my ongoing service fees and basically sold them that they will do the same work and it is for free. The clients asked if I could match the deal.
So we parted ways and Unisuper did an immediate rollover and all underwritten insurances were lost.
I can’t compete with that!
So a union super fund adviser has lured a client in based on cross subsidising their advice costs using fees for no service paid by other fund members. They have provided conflicted advice to rollover a third party product to their inhouse product, and in so doing have lost the client a significant benefit.
This sounds like a 10 mark FASEA exam question!! 1 mark for each breach of the Corps Act and FASEA Code of Ethics you can identify.
Hopefully the client has taken their story to the media and Beyond Blue. Given it was a union fund, there is no point expecting ASIC or AFCA to do anything.
This is yet another example of the unlevel playing field that the FPA is saying is “fit for purpose”. In reality, this Industry Fund is taking fees from all of their members (without informed consent), in order to pay their inhouse vertically integrated adviser bonuses to twist business. It’s disclosed in their UniSuper FSG,if you google it.
If you think this two tier system is fair, and sit back and allow this cancer to continue, you are being deceived on every possible level. This intrafund is an outrageous scam.
I’ve noticed FPA member base changing and their policy direction. As several large super funds have entered the advice arena the FPA have been getting payments and members from these sources. Don’t expect any type of level playing field with the FPA getting payments from insto, banks or even now Super funds.
If you have ever had a reason not to renew your FPA membership, this is it.
When 1000 intrafund salary & BONUS collecting advisers hold FPA membership without a murmur, it has become obvious the FPA has been hijacked by the union super funds. It would be interesting to do an audit about how much these union based Industry funds are corporately supporting the FPA today.
Any professional organisation that supports cross-subsidised personal intrafund advice fees, paid by super fund members who have not provided informed consent for those fees, and without the ability to opt-out of those fees, is ethically challenged. The FPA is effectively supporting a separate advice regime totally at odds with the FASEA informed consent criteria.
Either the Govt needs to introduce bi-ennial opt ins for intrafund advice fees, OR you introduce “Opt Out” for retail personal advisers. This is an industrial relations equity issue – it’s all in or all out.
Well said. I noticed the same issue, where Senior Union Super funds officials have been active in the FPA. The advice industry needs a body that represents Planners, whether they work for a Bank, a Super fund or self licensed. Not the Manager nor the licensee and certainly not the product maker, but the actual planners. We don’t have that and I’m at odds as to why any Professional Planner would renew. Sold their soles for a CFP logo and yet they’ll be here whinging. I question the morals of such people.
The issue is that intra fund advice does not actually follow the same processes and requirements of personalised financial advice. The FPA doing their best to push advisers under the bus again, they truly are wanting to destroy themselves.
More reason to quit the FPA & join other organisations that will fight to get rid of red tape creating Opt-ins, or get rid of Intrafund.
Professional Advice Relationship – From an Industry Fund?? Are you serious?? There is no disclosure and no external comparison done, there is no analysis done and there certainly cannot be any risk profile completed. If the client did have a balanced risk profile assessed, and then they were invested in the “balanced default option”….how does the Adviser get away with that balanced being invested in 92% growth assets with nearly half in unlisted assets??? Isn’t this outside the range? What questions were asked of the client in this professional relationship Ben Marshan?? Why isn’t the FPA questioning this advice??? And you acknowledge that many client cannot pay for a fee outside of super, so that makes it ok for the FPA to say, Industry Union Funds can have any fee they like inside super, paid from account, isn’t this an entry fee or a commission?? It’s good that Ben Marshan is acknowledging that Australians cannot afford advice anymore, it’s just a shame he wasn’t fighting for these same consumers when all the regulations and FASEA education standards were being debated, he was unfortunately too busy trying to be friends with O’Dwyer.
I think you’ll find a list of Advisers names, and one big fat membership cheque has a certain degree of influence. If you’ve just lost NAB and Westpac there’s a very obvious replacement and it’s Union Super Funds. I just hope Advisers leave the FPA and start putting Australians first.
How is it different if a super fund pays an intrafund adviser’s wage to give “free” advice to the client, versus if a super fund pays a percentage trail to an adviser to give “free” advice to a client? One of these payments was deemed to be evil and banned at all costs, the other is being expanded, as a retention tool for super funds. Both were paid to maximise FUM in the product, why is one still acceptable and the other not?
Its the VIBE. Payments to employees are good. Payments to small business to support their costs are bad. How pathetic but that’s the logic of the simpledoms running the show. The fact they have no experience running a small business nor an understanding of the significant job creation provided by small business is a big part of the explanation. At a time when we should be thriving and supporting the economy out of the recession the simpledoms are intent on closing small business down by restricting their life blood – cash flow.
Because the banning of trail remuneration was seen to be the easiest method of destroying many adviser’s businesses and was driven by ideologues and activist groups and the Govt was prepared to go against the grandfathered model despite Bill Shorten obtaining legal advice from the Australian Government Solicitor that the banning would not apply to existing contractual rights of an adviser.
Those contractual rights had not changed and yet the Govt proceeded in banning them and allowed the Intra Fund advice fees to continue without question.
Despite several attempts under FOI, Treasury continually refused to release the original legal advice provided to Bill Shorten.
robo debt got reversed ,might see the grandfathered commissions reversed
Why was it not ok for advisers to be paid for commissions then?
Quite simply because too many products were being switched and churned because of commissions and not in the client’s best interests. The thing that you and many others miss with intrafund (and I am certainly not all in favour of intrafund so don’t get me wrong – very much dislike the cross subsidisation of fees) is that at the essence of it – there is no product switching going on.
That’s what the regulators had huge issues with. And it’s hard to blame them.
So rightly or wrongly, you can thank those advisers who did the wrong thing (and in many cases it was more the organisations that directed them to do that) and put clients into products that paid commissions and were often not in the clients best interests, for the mess the industry is in now.
As an industry we can’t tee off at intrafund advice for the failings of the industry in the past – intrafund is not perfect by any stretch – but it’s a hell of a lot better than the churning and switching of products that was taking place for far too long. Too many advisers can’t seem to acknowledge that.
My opinion personally, before I get shouted down as pro intrafund etc etc is that scaled or limited advice has a place – but I dislike any advice that is limited to a particular product and if you want advice – it should be user pays, at the very least an opt in method to any cross subsidisation.
Except the Industry Fund “intrafund marketing reps” are being paid BONUSES to churn retail super over to Industry Fund super. So these reps have now become the key product switchers, as they are being paid to do it. They don’t get paid BONUSES for just turning up at the office desk each day twiddling their thumbs. An intrafund salary & bonuses are actually ongoing fees for no service, ala commissions. Some truth please.