The government’s proposed ban on MySuper advice fees could leave Australians materially worse-off if exceptions are not made, according to the Financial Services Council (FSC).
While the FSC supports the intent of the legislation, it has reservations about banning all advice fees from MySuper products, saying it will create a “two-speed system” that charges only some members out-of-pocket-fees and will distort consumer behaviours.
The FSC would prefer the legislation be amended to allow for one-off non-ongoing advice fees to be deducted from MySuper accounts, retaining the ban on ongoing advice fees.
“This approach would be simple for consumers to understand, simplify oversight of fees, and prevent poor consumer outcomes that are likely to result from a blanket ban on advice fee payments,” said FSC CEO Sally Loane.
“Removing the ability to pay for advice from MySuper accounts will have unintended consequences, such as reducing access to financial advice many people will need, or causing arbitrage between products.”
The option to meet some of the fee for advice through a superannuation account could lower the barrier to accessing it. Ms Loane believes that if the legislation is passed as it currently stands, consumers who cannot afford to access advice could be left “materially worse off” in retirement.
The FSC writes that banning all advice fees from MySuper products is only justifiable under “incorrect assumptions” – namely that superannuation only includes advice about specific investments and is therefore not required by MySuper members, and that all MySuper members are disengaged and do not seek advice.
“In reality, many people have actively chosen a MySuper product, potentially via recommendation from their adviser, and many default members later become engaged in their superannuation (for example as they approach retirement) and seek advice about their savings,” the FSC wrote in its submission.
The FSC also holds that significant protections are already in place to ensure advice is provided appropriately.
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