Vertical integration in the industry super funds is on ASIC’s radar, but referral agreements with independent financial advice groups may help companies avoid the regulator’s wrath.
In February, ASIC chair James Shipton told a Senate Estimates hearing that “no sector of the industry, big or small, that engages in vertical integration is going to be immune” from regulatory scrutiny, in response to Coalition senator Jane Hume’s questions about why industry funds were excluded from ASIC’s inquiry into in-house product flogging.
Mr Shipton’s comments were echoed this week by his deputy chair Peter Kell, who reportedly told an Australian Financial Review event that advice provided by super funds is on ASIC's agenda.
Commenting on the revelation, AIOFP executive director Peter Johnston told ifa that industry funds may wish to partner with the independent financial advice sector as a means of appeasing ASIC’s concerns about vertical integration.
“We believe ASIC will be satisfied with a hybrid approach to Advice,” Mr Johnston said.
“The fund should retain their in house Advisers to cater for the intra fund information members require but also have an external panel of independently owned or s923A compliant Advisers to deliver professional advice on a fee for service basis.
“Selecting the most appropriate Advisers, having clear objectives and giving significant control to Industry Fund management is the key to success.”
The pre-FOFA status quo of investment commissions in the financial advice industry precluded collaboration and meant industry funds had “little choice” but to adopt a conflicted model of their own by launching intra-fund advice services, Mr Johnston explained.
Now that the IFA sector has largely moved to a non-conflicted fee-for-service model, opportunity exists for partnership between the two non-bank communities, which ASIC may support, he added.
The AIOFP currently has referral relationships in place with industry super funds Tasplan Super and Statewide Super.
The FPA also has a referral arrangement with industry fund Cbus.
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