REST’s planned advice arm sparks vertical integration debate
REST has become the latest industry super fund this month to say it will build an in-house financial advice arm, but many are worried about the potential for vertical integration.
The industry fund for retail workers confirmed to ifa last week that it was in the process of building its financial advice division "from the ground up", not previously having had its own internal advice proposition.
The story generated concern from readers – with some commenting on the ifa website – who fear REST will join other institutions that operate with a vertically integrated model, potentially creating conflicts of interest.
Responding to these concerns, REST chief operating officer Andrew Howard told ifa the fund has decided to build up its financial advice division to focus solely on the "provision of advice to members" and help them save for retirement.
"We are really focused on members working with their own super and giving them guidance around the primary goal and core purpose of what we do, which is to help them have a comfortable retirement," Mr Howard said.
However, some ifa readers fear members will not receive conflict-free advice.
"I applaud REST's recognition that their members should be actively planning their financial future and considering estate management issues. However, being directly involved in the process will find REST potentially with the same issues of CBA and others who fail to see the obvious potential conflict in fulfilling two separate roles," one reader commented.
Another asked: "Will they recommend retail super or other industry funds under 'best interest duty' when that would appropriate?"
But not everyone believes this is bad news, with yet another commenter saying REST's new advice arm will mean "more Australians will be able to get advice, which can only benefit the financial planning industry".
"It will be interesting to see how it is rolled out and what advice they are going to provide. My guess is it will be basic advice and their target will be at the lower end, which is where most advisers currently can't afford to advise due to the costs associated," they said.
Speaking to ifa, Michael Pinn, a non-executive director of the AIOFP and manager of self-licensed firm, Pinn Deavin, said there could be pros and cons to REST's internal advice division.
"Staying in the industry fund may give a member access to life insurance the member could not obtain elsewhere," he said.
Nevertheless, the only way for REST to truly stay conflict-free would be to outsource the advice services completely, Mr Pinn said.
"No matter how independently-minded the adviser may be, in fact, you will never know for sure what bias was consciously, or unconsciously, involved with the advice," he said.
REST will continue to partner with Link Group's financial advice business, Money Solutions, for intra-fund advice.
Meanwhile, the fund has announced the appointment of Deborah Potts to the newly-created role of national manager of advice.
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