The industry super lobby’s position on FOFA is “hypocritical” due to the “non-transparent” nature of intra-fund advice, the Financial Services Council has told a Senate inquiry.
Speaking before the Senate Economics Legislation Committee inquiry into the FOFA amendments late last week, FSC senior policy manager Cecillia Storniolo said intra-fund advice is charged by superannuation trustees through the administration fee and is effectively a commission.
“It is a bundled advice fee that members (including default MySuper members) are unable to opt out of,” said Ms Storniolo.
“Put simply, if you don't seek intra-fund advice, you still pay. It is a bundled advice fee which is cross-subsidised and hidden from members. It is a commission,” she said.
While Ms Storniolo did not single out any particular lobby group directly, she said it is “hypocritical” to suggest that commissions should be banned under FOFA (including for general advice) - as has been called for by Industry Super Australia on numerous occasions - when intra-fund advice is charged “in a non-transparent manner”.
“[The FSC] strongly suggests the committee think carefully about intra-fund advice when it turns its mind to the matter of general advice and conflicted remuneration,” said Ms Storniolo.
Turning to the controversial issue of general advice, she said it “should not be called advice at all” and should cost the consumer “nothing”.
“General advice is a service consumers access generally from bank branches and call centres,” she said.
“Providers of this service should be able to be paid salary and performance pay bonuses for providing good and/or exceptional service to consumers,” said Ms Storniolo.
“We understand the consternation raised by some that the general advice exemption included in the Bill enables a reversion to pre-FOFA conflicted remuneration practices. We contend that the need for the exemption is not for that objective.
“The FSC has examined the drafting in the Bill and recommends that the committee consider limiting the exemption to ensure that financial planners are not able to earn a commission as a result of the exemption,” she said.
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