Speaking to ifa on the sidelines of Australia’s first IFA-CON last week, AIOFP executive director Peter Johnston tipped greater collaboration and referral between independently-owned financial advice firms and the industry super funds as the latter wise up to the differences between the various segments of the financial advice industry.
“The intentions of FOFA originator Bernie Ripoll were comprehensive and well-intentioned, however the dominant industry stakeholders wielding their political influence dramatically changed the spirit of the proposed reforms to suit their own agenda,” Mr Johnston said.
“These failings are now starting to play out in the market where superannuation funds are now realising that not all financial advisers are legally bound by the ethics and spirit of FOFA.
“Unless you read the ‘small print’ of the FOFA legislation, most believed that all conflicts had been eliminated with adviser’s market conduct, this unfortunately is clearly not the case with around 80 per cent of the adviser sector.”
Mr Johnston pointed to the vertically integrated model of the institutional advice arms, as well as the “administration fee conflict” presented where advisers recommend SMSF establishment, as examples of “elephants in the room” for potential industry fund referral partners.
“Independently-owned advisers that operate their own AFSL and do not deal in the SMSF space are the perfect super fund partner, they are administration structure ‘agnostic’ and charge the client directly for any advice,” he said.
The AIOFP has a number of existing referral arrangements in place with industry funds, including Statewide Super and Tasplan.
The Unions run the biggest vertically integrated super funds in the country. If I’m a member of Australian Super and I go see a planner employed by or aligned with Australian Super, where will I be recommended to have my super with? What insurance will I be recommended to take out? I’m guessing that 99% of the time it would be with Australian Super. Same for all the other Union Super Funds.
But how could any adviser meet their client Best Interests Duty and recommend insurance via Australian Super? How can you recommend cover that is not only more expensive than retail insurance cover (in most cases) but that is demonstrably worse for the member in terms of the definitions? Is it because they have a restricted APL that only includes insurance offered via Australian Super? how can that be the right thing for clients?
When Unions get paid tens of millions of dollars each year from Union Super Funds that look a lot like commissions for channelling Union members into the Union related super fund, isnt that a breach of the intent of FOFA? Union Super Funds may not pay comms to financial planners…only to Unions….. #UnionsArentSuper
Furthermore, how could an ethical, licensed planner recommend a super fund that uses members retirement savings for union financial & political purposes, and is therefore at high risk of being classified as non complying.
Your comment shows a total lack of knowledge of the Industry Superannuation sector. I guess it’s easy to make false statements under the guise of “anonymous”. For a start, there is no such thing as a “union fund” as you have stated. Funds are required to have equal Board representation from both members and employers. And re your comment about unions being paid “tens of millions of dollars”, again, one would like some sort of substantiation of an outlandish claim like this. With the level of regulation and scrutiny super funds face through the super regulator (APRA), this is a rediculous claim. And finally, any financial advisor working under a financial licencee (which is a requirement in Australia) they ALL have a fudiciary duty to do what is in the MEMBER’S best interest.
Two questions: 1. What is Johnson smoking? 2. Can i get some?
The biggest conflict of interest in financial services in Australia is the unions owning financial products.
So again, another “loophole”. Me thinks these “holes” in regulation allowing for nonsense has given rise to the SS Titanic when it comes to our industry. With regulators like this, no wonder more discoveries are made with the regulator asking themselves the obvious question…gosh…did we do that ?….
My mother always said…Stupid is as stupid does. Stupid government with stupid regulators with stupids in our industry and few know what they are doing while the rest are simply pretending to know or are driven by ideology or plain greed, Wait for the next discovery and more red tape to plug another loophole….meanwhile a client of mine just rang to say a property spruiker is coming to their home tonight to sell them the concept of paying tax and planning for retirement. Bet this will entail a mortgage tapped to the equity in their home to buy an inflated property in price unaware of a looming bubble and all it presents for their retirement. No SOA, conflicts all round, massive commissions and the regulators say that’s fine and dandy. Loophole…we sure have a few and the just the right fools to solve this. Our associations still say nothing.
First of all we have to listen to the self serving claptrap from the industry superfunds and now Peter Johnson is joining the chorus!
Quote from “The Australian” – Business Review email, 11th September, 2017.
[i]The financial watchdog will be granted powers to force the $2.3 trillion super industry to disclose
hidden payments to unions, as it emerges the shop assistants union has been paying 10 per cent of members’ dues to Coles and Woolworths as compensation for the supermarket giants deducting union fees from workers’ pay. [/i]
Vertical integration, union style.
10% of dues!…..Must really be worth their while to railroad THE MEMBERS THEY ARE BEING PAID TO REPRESENT into their own union fund.
Nuff said!!
So if an AIOFP adviser gets a referral from an industry fund are they going to act in the client’s best interest and roll the client to a better fund? Or are they going to leave them where they are even if there is a more suitable fund available??? Would that be in the spirit of FOFA?
Agree, this should be a pretty obvious issue!!
Gee, would have thought that the Industry super funds would want a playing field that favoured them ?
it’s not like they hate the IFA network or anything ……..