In response to questions from committee chair and Liberal MP Tim Wilson, funds including Cbus, MTAA Super, Prime Super and TWU Super revealed the extent to which they employ intra-fund advisers, as well as details around their remuneration and funding arrangements.
Of the four funds, Cbus was the largest employer of intra-fund advisers, having employed 24 advisers directly in the 2019 financial year. This was an increase of 4 advisers since 2017, prior to which the fund outsourced intra-fund advice services.
MTAA Super noted it employed 11 intra-fund advisers and had done so since 2018, with further phone and online-based intra-fund advice provided through an outsourced arrangement.
Prime Super stated that it employed two intra-fund advisers directly, while TWU Super used the services of just one intra-fund adviser who was outsourced from the fund.
While Cbus declined to give details of intra-fund adviser salary arrangements citing confidentiality, MTAA Super noted advisers fell into a salary band expected to be between $108,000 and $147,000 for the 2021 financial year.
However, the fund’s enterprise agreement noted employees who exceeded their KPIs were entitled to receive up to 2 per cent above the maximum salary band for the year.
Prime Super noted the “aggregated cost” of its intra-fund advice services for the 2020 financial year was around $770,000, including its two advisers’ full salary packages and eligible performance payments, as well as the salary of a business process manager.
The fund stated performance payments were available to both intra-fund advisers, and call centre staff who provided general advice, “based on overall business performance and individual contribution”.
Meanwhile TWU Super noted their outsourced intra-fund adviser’s salary came in at around $107,000.
In terms of funding, Cbus also declined to answer a series of questions around cross-subsidisation of advice from its members, saying it was “unclear what information is sought” by a series of Mr Wilson’s questions.
MTAA Super noted that the cost of advice was listed as an expense on its annual report to members, but that technically no fees were charged that related specifically to intra-fund advice.
Prime Super stated that its intra-fund advice offering was “a service offering” that all members had access to, and that “all service offerings of the fund are funded by the established member fees”.
Held some of my super with AustralianSuper for a few years now to compare the pair.
Unlisted allocation on my high growth has increased much.
More importantly, when I do investment switches, the reporting doesn’t even give me a unit price.
Talk about lack of transparency! I’m outta there.
Australian Super doesn’t have Unit Prices, rather crediting rates
Crediting rates, which are applied daily and at the time of sale.
Thanks for the correction, though my underlying point remains. Close to nothing on the transaction statement. I’d have to download an excel sheet located elsewhere on their website for the respective investments, cross correlate, and make the calculation myself. A bit scary for our largest super fund.
Another example is the best selling book “Barefoot Investor”. I agree with some strategies in the book, but the book recomends particular products, investment options, insurances etc… the guy is raking in a fortune and same thing – no SoA, no Know your Client, nothing…
Lets put a different spin on this,
What if Colonial First State came out and announced today they were setting up an internal intrafund advice unit to take the burden off advisers or to service the “orphaned clients”
How do you think community sentiment would be then.
This is exactly what will happen as product providers realise the need to retain FUM. It’s been a master stroke by providers. Get caught out, blame advisers, enforce study requirements to cull advisers, licensees sack advisers to reduce competition, rollover on turning off commission, help advisers ‘give back’ non commission clients to ‘help’ the advisers (the ones they sold to them at 4x) now that adviser numbers (sorry competition) has been lowered, offer a ‘direct’ ‘advice’ offering funded by all members fees to a few (an internal commission/not paid to 3rd party adviser)
FUM retained without having to offer a competitive product.
Brilliant.
What’s to stop us establishing a white label super fund and getting the trustee to enter into a service agreement with us as a licenced advice provider for say 0.2% charged to all members to provide intra fund (simple) advice…oh I know they banned commissions. How on earth is this current carve out any different to the previous model except now only super fund trustees can collect commissions which they then pay as salaries to tied financial advisers? Maybe if we did set up an arrangement like this ASIC will take notice and ban it – but at least it would ban it for all and create a level playing field.
Yes anyone can be not-for-profit if they waste enough of their member’s money on football teams, excessive salaries, and jobs for union mates. Not to mention their dodgy unlisted asset strategies where they make-up cosey valuations with self-interested investment banker refugees and conflicted auditors. Has everyone already forgotten about MTAA’s disastrous performance during the GFC? If there is a run on liquidity some of these funds will have some very poor returns, ruining their member’s retirements as the baby boomer bulge works its way through. ASIC and APRA are completely asleep at the wheel and have become far too chummy with their industry fund brethren.
read the nab nulis charges – they did a quasi this arrangement with advisers and got crucified for it.
Union Super funds want ongoing advice fees banned and they want it made easier for these groups to give advice. They are now directing the FPA on this even, in return for memberships. Independent, unaligned advisers don’t have anyone to go into bat for them and it will be a very different playing field
Interesting all these comments…
How many of you have actually “experienced” intra fund advice?
Those commenting, do you know of the advice provided?
Intrafund Advice is “Advice”
There is a Statement of Advice.
It deals with contributions, investments, and the really basic stuff, for people who will not pay the thousands for getting really basic help.
It is not full and comprehensive advice, and the members are advised of this, the members with more complex needs are also recommended to seek out further advice with an external adviser.
So stop whinging, it is advice you are not going to provide at a cost that these clients can afford or a willing to pay.
Intrafund is distinctly different and in some ways vastly superior for the average person who needs really basic advice about their superannuation account.
I have worked in the Industry across every single aspect of advice, from Boutiques to Banks to Super funds – all are good in there own way…
I have seen the advice provided by a lot advisers and the fee’s that were charged, so stop complaining that the average person can get a little bit of help – because these people are unlikely to ever seek out full advice first.
How about instead of whinging about intrafund advice, we as an industry seek to find a common voice on ways to have an advice industry affordable to all, with many different ways and forms of obtaining that advice.
What a race to the bottom
A person who knows … aka a person with their snout in the trough.
But….. it is against the Law!
I have experience “intra fund” advice. Over the years I have provided thousands of them, as an adviser who has worked for industry funds. There is little consideration in many cases of the funds being rolled in, the benefits lost, or appropriateness of the strategy. One industry fund, which shall remain nameless, even put a target on the number of TTRs provided to members for their advisers – how ridiculously conflicted and ill-considered. Regarding “people who will not pay the thousands for getting really basic help” no you’re right they won’t pay that’s why industry funds rob their other members to pay for this advice.
How do you meet your Code of Ethics obligations if you are not giving consideration to any other funds or scoping out many areas the client needs?
The way union funds do it is by using unlicensed call centre and workplace sales staff to give advice. Those people don’t have any Code of Ethics obligations, it only applies to licensed advisers. Similarly with Best Interests Duty.
The number of licensed advisers giving intra fund advice within union funds is not really relevant.
Most union super intra fund advice is given by unlicensed call centre staff and workplace representatives. These people are not properly trained, and not subject to Best Interests Duty or the FASEA Code. They give advice under the “general advice” loophole, even though it really is personal advice.
It seems as though Tim Wilson doesn’t really know what questions to ask. Here’s a few for you Tim, but happy for other to add to them:
Questions for ASIC/FASEA/AFCA
1. Funds can provide intra-fund advice on insurance. Given Hostplus have recently announced that their Income Protection insurance premiums have increased by 73%, do you still consider it acceptable that these funds can recommend their members keep their insurance with them without having to research external products. How is this in the members best interest.
2. Funds can provide intra-fund advice on increasing contributions without considering the broader implications on the member. Putting aside that this may not be in the members best interest if they want to retire before they are 60, why is it ok for intra-fund advisers to do this, when a non-fund aligned adviser could not provide the same advice without breaching the best interest duty.
3. Funds can provide advice on changing investment options, with limited details of the rest of their financial situation. Why can they do this when a non-fund aligned adviser could not provide the same advice without breaching the best interest duty.
4. Intra-fund advice is designed to provide members with easy access to simple advice. However, for advisers that are not aligned with Super funds, they are required to meet much more stringent standards and red tape. Why is it OK for super fund members to receive advice in a non-complicated manner that does not require exhaustive fact finding processes, but others are not? What are you doing to make the provision of advice for all Australians much more simple and affordable?
Questions for Super funds
1. Do you advise/advertise to all of your members that they can access these services, and if not why not.
2. Are members that have not accessed these services made aware that some of their fees are being used to provide advice to others?
3. What percentage of your advice requires an SOA?
4. If you provide insurance advice, do you consider any other insurers besides your intra-fund one? If not, is this in the best interest of the client?
5. When you provide advice on increasing contributions, what percentage of people do your advisers recommend they don’t do this due to other factors in the members life?
When you think about the logic of this all what is stopping any retail or corporate fund naming themselves a industry super fund and paying financial advisers out of their profits without any disclosure at all.
From my understanding, this is not limited to industry super funds, but all funds with MySuper products. However, it does not allow you to charge ongoing fees and only allows advice on what is in the fund.
I find it interesting that people constantly whinge about it, but they could offer it to their clients just they would need to change their business.
but they could offer it to their clients just they would need to change their business
Change it to what – being an employed adviser of the product manufacture and only allowed to sell that one product? And you find this interesting?
the question remains, How much revenue was collected from members accounts? either actively or passively for the provision of these intra fund “services” and compare that to the actual costs incurred by each fund.
So can ASIC tell me how many annual reviews are being kept and how does the best interest duty work for them?
This Govt does not even appear to have any idea about our sector period, be it this rort that the Industr funds have been pulling for quite some time now, no FDs, no opt in, no fee renewals, what a con it is, but i repeat this govt is clueless on the varients that permiate the industry in its entirety.
so in summary…..
– fee for no service as it was all bundled together in the annual fee whether you got serviced by an advisor or not?
– get paid bonuses {conflicted remuneration} for offering general advice over the phone
– telling a client about the insurance, investment options etc , no 70 page advice document required, no disclosure of bonuses or conflicted remuneration required and no comparison to alternatives considered?
– and in CBUS case well you can all bugger off we aren’t telling you anything.
100% agree with you mate
General Advice = PRODUCT INFORMATION and that is what it should be Called, it’s not ADVICE !!!!!!!!
Industry Super must answer what % and total number of members use Intra Fund Advice.
And Then it can be clearly seen how many members of Paying Fees for No Service.
[b]IntraFund Advice = Hidden Commissions paid Advisers and Advice, that a very small % use and the whole membership pays for: [/b][b][/b]
– Hidden Commissions, not disclosed to each member
– Cross subsidised Advice paid for all by the few who use it = Fees / Commissions for No Service for most members
– Conflicted Advice by Vertically integrated advisers and product
– Doesn’t meet Best Interest Duty
– Doesn’t meet FARSEA Code of Ethics Values or Standards
But ASIC think its just wonderful that their Industry Fund besties can operate with zero compliance.
Level Playing field for Advice ASIC – not a freaking chance.
This is a loop hole that must be closed. It is ridiculous that there is no level playing field on this. A total sham.
That’s not many advisers to support those client bases. Interested to see have many personal advice intereactions occurred across the client base and how many SOA;s were provided.
And reviews? How many reviews do these advisers do? Or is all just cash & dash….??
Prime Super $128,000 members…. 2 advisers doing what one SOA a day? = 500 pa max. so say each member is “charged” $10 pa from their admin fee gives $1.28m for advice….. each SOA $2560 …. reasonable cost but effectively 0.4% of members benefit from subsidy of the other 96.4%. Unless every SOA recipient pays the full cost of advice.
None to the SOA’s. They don’t need to for intrafund advice and all the industry funds provide is intrafund advice – even if it is personal advice.
Partly correct. Some of the union funds do have licensed advisers on staff who provide SoAs for intra fund advice. They make a big deal about this to try and pretend they are complying with the law.
However most union fund advice is given by call centre and sales staff who are not licensed, not subject to BID, not subject to the FASEA Code, and don’t provide SoAs.