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.
The only way advisers will EVER be considered professionals is when the chains are broken with vertically integrated product manufacturers. ALL Financial Planners working under the Best Interest Duty obligations MUST be allowed to perform their job without any links to product. Industry super or Banks.
ALL advice must only be provided by a fully qualified and licensed adviser- No carve outs or exemptions for direct product flogging under general advice or intra fund advice. Then and only then will we be considered a true profession and the never ending adviser sledging and bashing might actually one day stop. That will be the only way to bring Trust back to the industry and to consumers. FASEA won’t solve that!
Agree. And “vertically integrated product manufacturers” should include union funds, advice firms with white labelled products, and SMSFs that are administered inhouse.
So the solution is to have an agreement with the ‘independent’ adviser whereby the industry funds refer members to the adviser for advice. How long will that last if the adviser switches the funds to another super fund or SMSF ?So for the arrangement to work, the adviser will be conflicted.
Such arrangements only suit the industry fund where the client needs advice other than the industry fund–centrelink- insurance – spouse etc. They will only pay a set fee for upfront and then segregate the super aspect only. Jimmy- correct in all aspects- so why would we help the enemy from being treated the same as the rest of us. If the radar is accurate and zero exemptions- the outcome will be verrrrry interesting if a level field approach is applied.
Surprise..surprise.. another sleazy back room deal… of course this was going to be the outcome. I want to provide advice to an industry fund member.. they won’t deal with me and they wont allow me not to charge a fee for service.
I’m guessing another special outcome will be the outcome!
Hopefully Shipton isn’t as stupid as the previous ASIC heads. These cosy agreements between Industry Funds and financial planning groups are not a panacea to avoid conflict. They worsen the situation because they camouflage the bias and in my opinion they need to be stamped out altogether. Imagine pharmaceutical companies having special referral arrangements with doctor clinics? Would that be tolerated? Of course not. I have only seen one of these agreements, but it contained clauses which placed a great deal of pressure on the advisers to recommend the Industry Fund product. In my opinion, we need to get to the point where all super funds, life insurance companies and other product providers are required to recommend consumers obtain independent financial advice before proceeding and they should not be allowed to refer them in-house or to advisers with ‘special arrangements’.
We have committed to FOFA and the substantial improvement in standards being rolled out by FASEA. It is now time for product providers to come under scrutiny and clean up their act.
There may be referral arrangements currently in place, but what about the parameters placed on those arrangements. If you are constrained as the independent third-party adviser into retaining or using the products of the Union Super Fund, then does that really speak to independence? How does that satisfy the best interests duty of the adviser? If I advise a client to ditch their CBUS Super group insurance in favour of a personally underwritten retail policy where they have control, certainty, better quality cover and generally a lower premium, I will be penalised under the arrangement. I wont be able to get paid for my advice from the Union Super Fund and if it occurs on an ongoing basis, i will be kicked off the referral program. How does any of that serve the client/member? Who are we working for here? The Union Super Fund or the client/member? Yep, remember….we’re all in this together ….
I can confirm they only allow you to provide scoped advice AKA not consider other super funds… Exactly why I told them I wouldn’t bother with the referral relationship. Provide the best advice possible but dont you dare take FUM away from us… No better than the banks.