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Industry funds eye advice deals

A former industry super fund CEO has tipped referral arrangements between funds and retail financial planning groups to escalate, with the non-aligned sector in the driver’s seat.

Speaking at the AIOFP’s offshore conference in Shanghai yesterday, former Local Super chief executive and Mercer consultant Nic Szuster said that while advisers have historically viewed industry funds as “competition”, a more co-operative relationship between the sectors is emerging.

Mr Szuster - who has joined the AIOFP staff to drive its industry fund co-operation strategy - said many industry fund boards have turned their backs on the traditional “embedded” model in favour of referral partnerships with existing advice networks.

“This model is losing traction because the industry funds are saying they don't have full control over them and they are sort of a ‘halfway house’ - they’re not quite sure how to go with that model,” he said.

“The model that is getting the most traction is the referral model.”

Singling out the recent referral deals between Cbus and the FPA, and First Super and Infocus, Mr Szuster said industry funds are looking for trusted partners and that non-institutional financial advice businesses are in a more advantageous position.

“We are living in exciting times for the industry and for the association,” he said.


“If you read media reports, there is this whole push towards the non-aligned and independent practices. There is a buzz around non-conflicted advice and organisations that don’t have any sort of connections with the institutions.”

Asked whether the best interest duty could be a sticking point where a recommendation to exit an industry fund is made, Mr Szuster said FOFA’s remuneration reform has watered down this potential hurdle for referral arrangements.

“Advisers will act in their clients’ best interests and that would include advising to take members out of the fund. However, with a move to fee for service, the incentive for an adviser to move a member out of one fund and into another is diminished,” he said.

The AIOFP is currently in discussions with a number of funds attracted to the lobby group’s non-institutional structure and Certified Financial Strategist (CFS) adviser program.

Industry funds would be required to go through the AIOFP’s Filtered Research Committee accreditation process before deals are formalised.