Advisers shun industry funds: report

The number of clients switching into industry funds on the recommendation of a professional financial adviser has plummeted, according to the latest Roy Morgan research.

According to the Roy Morgan Superannuation & Wealth Management in Australia report, seen by ifa and due to be released next week, the number of professional advisers recommending their clients switch to industry superannuation funds has almost halved in just three years.

“There has been a decreasing trend for financial planners and accountants to direct switchers to industry funds,” the report states. “In 2011, 18 per cent of people switching through an accountant or financial planner were directed to industry funds, and in 2013, this has decreased to 10 per cent.”

The figures for industry fund recommendation pale in comparison to retail funds, into which 50 per cent of all superannuation products switched through a financial adviser flowed in the 12 months to June 2013.

“This reflects the continued importance that the major retail funds place on their network of aligned advisers,” the report states. “A further 25 per cent of funds were directed to other retail or corporate funds, while industry funds received 10 per cent.”

However, according to a long-serving boutique financial adviser, speaking to ifa on condition of anonymity, the numbers should not be considered low but surprisingly high.

“I am surprised the survey results are as high as Roy Morgan says,” the adviser said. “I’ve never met an independent investment adviser that would recommend a union fund, because their funds will not come clean on their actual holdings or internal [funds under management] fees.”

Industry funds exhibit a lack of transparency that make it difficult to fulfil FOFA’s best interest duty, the adviser said – in stark contrast to Industry Super Australia chief David Whiteley’s comments that recommending industry funds is actually conducive to meeting the fiduciary duty.

Commenting on the findings, Financial Planning Association chief executive Mark Rantall told ifa that readers should not be too quick to judge the reasons for the drop, suggesting the growth of SMSFs may have played a role.

Mr Rantall said he hoped the results were not in response to “campaigns” by industry super lobbyists or any acrimony between the sectors.

“It doesn’t serve anyone to have any particular sector be at war with the other,” Mr Rantall said. “I think at the end of the day, an industry fund is a product in the way a retail fund is a product and what’s important is the role the financial planner plays in determining the suitability of a particular product for a client’s needs; the critical thing is that advice is in the best interests of clients.”

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