In its submission to the Australian Law Reform Commission’s (ALRC) Background Paper FSL11 – Superannuation and the Legislative Framework for Financial Services, the Financial Advice Association Australia (FAAA) has reiterated its view of intra-fund advice.
The FAAA noted while it supports the role that intra-fund advice plays in making advice more available and affordable to Australians, it stressed intra-fund advice should be “simple advice only”.
“We do not support any broadening of the intra-fund advice regime to more complex advice needs, such as retirement advice, that requires the services of a fully qualified financial adviser/planner,” the FAAA said.
In the background paper, the ALRC acknowledged that the changes proposed by the Quality of Advice Review (QAR) will potentially affect the way in which trustees provide intra-fund advice.
The ALRC explained that while the term ‘intra-fund advice’ does not have a legal definition, it is broadly considered to be “advice that is paid for through the collective fees of fund members rather than by the individual member”.
“The proposed changes in the Quality of Advice Review (such as the extension of the definition of personal advice, the removal of section 99F of the SIS Act on collective charging, the duty to give ‘good advice’, and changes to personal advice disclosure) will potentially affect the way in which trustees provide intra-fund advice,” the commission noted in the paper.
“The submission to the ALRC from the Law Council considers that it is important that intra-fund advice continue to be offered under any new reforms, and that the various types of robo-advice also need to be accounted for in this context.”
The FAAA has on multiple occasions conveyed apprehension regarding the proposed expansion of intra-fund advice.
In June, FAAA CEO Sarah Abood said the FAAA does not endorse the QAR’s specific recommendation concerning super funds in its current written form.
“We need some more guardrails, we need some more controls to ensure they meet the purpose they’re intended to,” she said, adding that guardrails could include minimal levels of education and qualifications.
She explained at the time that the primary concern FAAA members have regarding super funds expanding their role in advice pertains to the terminology that would be used to describe such advice and the potential confusion it may create among consumers.
Later that month, FAAA chair David Sharpe took the step of categorising the recommendation made by QAR reviewer Michelle Levy to increase the participation of superannuation funds in offering advice as having the potential to be harmful.
Mr Sharpe said at the time that some of Ms Levy’s recommendations almost give carte blanche access to super funds “to do what they want” in advice with unqualified employees.
“I think the minister has identified the fact that we want to make sure that there is a minimum level of education and the level of complexity that super funds can provide. Look, a really simplified analogy, what we see in medicine is that we can get simple advice not from a doctor, whether it be a physio or pharmacist, right down to even the packaging we see with our paracetamol, which has dosage instruction, but when it’s a level of complexity, we still see our doctor. I can see that playing out here,” Mr Sharpe said.
“Simple advice, go to your super fund. Anything with any material complexity, still see a qualified adviser.”
While the government’s plans for the superannuation sector remain undisclosed, Minister for Financial Services Stephen Jones has signalled his endorsement of funds playing a role in addressing the advice gap.
I think the FAAA perhaps don’t quite understand that intra-fund advice (aka personal advice) is currently delivered by qualified advisers who have met all of the same educational requirements as an adviser who works in private practice.
Superfunds have many members with smaller balances at retirement and very simple asset structures outside of super who still need personal advice. They are unlikely to afford the services of an adviser who needs to make a profit from the clients they work with. Should those members simply be ignored because they can’t afford it?
Allowing intra-fund advice to expand into areas such as Centrelink will make advice far more accessible to those types of members and ensure they are given the same opportunity to live a dignified retirement as a client with >$500k.
I think Jane doesn’t quite understand that union super funds have been providing “advice” for years, via untrained, unlicensed call centre and sales staff. It is a key part of their inflow and retention strategy. Yes, they also have a few token licensed advisers for show, but that’s not how most of their “advice” is delivered.
Or perhaps Jane does understand the dodgy behaviour of union super funds all too well, because she actually works in union super PR, and is just spreading the spin?
Why should the 90% of Industry Super Members not getting Intra Fund Sales Advice be forced to Pay bigger HIDDEN COMMISSIONS for No Service to provide Full Retirment Advice for the 10% that want that Advice.
Why should the members, even with small balances not pay for their Own Advice ?
If the Intra Fund sales Advice has value, includes other assets, spouses assets and Centrelink etc. Why not Charge them for it out of their Super Balance ?
One set of rules for advisers. Oh, and make them oblique. Then, change them to make it tricky to meet compliance requirements. Give ASIC / AFCA free reign to pounce on any adviser in the mere hope they will be found guilty. Meanwhile, lower all requirements for the super funds. Have I missed anything?
Sarah is really impressive based on the QoAR webinar where she politely and accurately explained to Michelle Levy why some of her ideas around non-relevant providers were impractical. Glad I kept my membership up. ALRC also explained to the government this is an urgent area (Advice) that needs reprieve yesterday – and that’s from lawyers benefiting from the current shambles. Hope the Govt DOES SOMETHING and is soon to give real advisers a reprieve.
FAAA please define ‘simple’ advice. No grey areas permitted, must be black & white for every case otherwise we will have another debacle. You can’t. Thought so.
While I completely agree that making advice more available to Australians is vital, I wonder if there might be room for a broader perspective on the forms this advice can take.
We all want to see a united, thriving advice industry, don’t we? There are indeed plenty of clients to go around, and our collective focus should be on enhancing the quality of advice, rather than dwelling on our differences.
On a side note – the FAAA’s advocacy for video SOAs is an innovative idea, but have we fully considered the flexibility that future legislation could provide? Could we, as an industry, find a way to ensure that requirements are captured, irrespective of the form they take? Your investment in a video solution is commendable, but I can’t shake the feeling that a more inclusive approach might serve us all better (especially as most clients value their face time with an adviser, let’s not replace the adviser with technology, instead look to technology to provide backoffice efficiencies to increase face time).
Hi Chris – one of the underlying parts of the video SOA project was the regulator’s confirmation that the existing regulations are already platform agnostic. So long as the content requirements are met, it doesn’t matter whether they’re delivered in paper, PDF, video, PowerPoint, or any other format.
by definition when you are talking about people’s retirement savings – it is impossible for it to be simple. We are supposed to be professional and make adequate enquiries. If they are not trained qualified or supervised how are they going to know where to start.
Perhaps for a product provider it is more about the FUM?
The FAAA are out of touch and just don’t get it that these Super funds when it comes to sales practices will make Storm Financial and the Banks look like Angels. I appreciate they’ve modified there approach, but I don’t think they’re going hard enough with the NO vote in order to get the needed common sense outcome due to a Minister on the payroll of large super funds.
Why am I sitting here writing a 9 page RoA for intra-fund advice. Why ?
Why not become a real adviser?
By definition Intrafund advice currently doesn’t include review or implementation services. Not sure why an ROA would be produced.
It’s required by law. Better talk to your compliance manager.