In response to questions on notice from the House of Representatives standing committee on economics, the industry fund giant gave insight into its advice provision. Financial planning services at the fund are provided by its business, Aware Financial Services Australia.
The fund, which recently merged with VicSuper and is set to consolidate with WA Super, had 190 advisers employed during the last financial year, with total employment costs of $26 million.
The year before the fund spent $28 million on 217 advisers and in financial year 2018, it dropped $31 million on 214 advisers.
The fund’s advisers have been providing both intrafund and comprehensive advice for the last five financial years, with a specific intrafund team comprising between 10 and 14 people.
The total revenue generated from the advice segment came to $104 million for FY20, an 8 per cent drop from the prior year’s $113 million and 15 per cent down from two years prior.
Advisers working for the fund received remuneration packages (base salary and super) in the range of $100,000 to $160,000 in FY20, compared with a previous range of $75,000-$152,000 in FY17.
The direct costs of providing comprehensive advice are paid for by the member receiving it, while intrafund advice is covered by the administration fee charged to members.
Aware Super reported there had been several changes to its advice model during the last five financial years, as the broader advice industry underwent changes and it integrated the StatePlus business.
From FY16 to FY19, StatePlus ran as an integrated advice, super and investment operation, accounted for as a single entity.
But Aware Super stated it did not have specific accounting for each line of business, particularly as it related to support units such as marketing, legal, compliance and regulatory oversight.
Other funds, including Cbus, MTAA Super, Prime Super and TWU Super, have also revealed the extent to which they employ intra-fund advisers to the committee.
Cbus was the largest employer of the four funds, with 24 advisers in the 2019 financial year.
In June, Aware Super refuted claims that its merger with VicSuper would result in advice fee hikes for members, following media reports of expected rises to surpass 30 per cent.
I would rather use an intrafund or robo-advice tool than pay a financial planner for an SOA that isn’t worth the paper that its printed on.
Hahaha, and we would prefer that morons like you stayed away! Thanks, and thank you for making me laugh out loud on a Monday! 🙂
Agree SoAs are over the top wasteful compliance documents mandated by Govt and ASIC that are not worth paying for.
Please write to your Federal member about such BS costly REGS.
One day Advisers may be free of such wasteful costly compliance.
Like intra fund advisers that are able to operate with zero real adviser laws. No best interest, no FARSEA, no SoAs.
The lack of a level playing field of Advice has to change.
Anyone want some cheese with the whining going on here?
ASIC is corrupt if it isn’t taking action to the full extent of the law and the intentions behind the Corp’s Act.
Talk about [color=red]planners taking numerous Ethics courses and learning right f[color=red][/color]rom wrong[/color], [b]ASIC need to be schooled hard rectally[/b][b][/b] with recognising these principles!!
Glad I didn’t go to your school.
I know a few advisers here and they said the fee for no service bill is huge, mainly from FSS clients and soon to be revealed.
Correction StatePlus clients not FSS clients.
Section 99F(1) of the SIS Act states the following:
The trustee or the trustees of a regulated superannuation fund must not directly or indirectly pass the cost of providing financial product advice in relation to a member of the fund on to any other member of the fund, to the extent that:
(a) the advice is provided by:
(i) a trustee of the fund; or
(ii) another person acting as an employee of, or under an arrangement with, a trustee or trustees of the fund; and
(b) the advice is personal advice;
So, how does a super fund that charges a fee to all members for the purpose of providing personal advice satisfy this if a large number of those members never access or receive advice and the cost of the advice provided to other members is subsidised by those who pay a fee but do not receive the service ?
Doesn’t this mean the cost or part thereof of the member receiving the advice is indirectly passed to those members who are not receiving the advice ?
https://asic.gov.au/regulatory-resources/superannuation-funds/superannuation-guidance-relief-and-legislative-instruments/giving-and-collectively-charging-for-intra-fund-advice/
Just read the whole document….wow.
I recommend that everyone who has an issue regarding the Intra Fund advice model read the link to ASIC’s page as noted.
This very clearly demonstrates why Industry and other super funds will just be sitting back laughing at all of us crying and screaming about the injustice and inequity. They have a big tick to continue doing exactly what they are doing and ASIC aren’t going to touch one of them.
This is wrong.
What’s your solution Agent 86 on evening up the playing field and at the same time encourage members of super funds to seek simple one-off personal advice on investment, contribution and insurance…. not sure how insurance can fit the bill?
Would you like these members to become your clients, provide an intra-fund type service and then invoice the super fund for a couple of hours of your time? Are clients wanting one-off advice to determine an appropriate asset allocation using pre-mixed investment options within their $50,000 super fund account the type of client you are looking to attract through your doors?
Or do you think all vertical integration of advice services within super funds should be banned all together?
Same could have been said from the clients of advisers who were charged an ongoing fee/commission and yet only saw the advisor when they wanted or needed to. But apparently that is wrong and banned.
The reason most planners are outraged (even if like us, they have HNW clients that are reviewed/serviced regularly and no small clients in that category) is that it is inherently wrong to treat one group as criminals and the other as saints for exactly the same circumstances.
It was only about 3/4 years ago they amended their AFSL so that there AR’s could advise on cash held in personal bank accounts, such as withdrawing out to make contributions or keeping something as basic as a cash reserve.. Imagine going to an adviser thinking you’re getting advice, and your personal cash levels are scoped out. “Scoping” is the big thing and it’s because of Advice firms like this trying to carve outs.
VicSuper has approx 250,000 members.
WA super has approx 50,000 members.
A total of 300,000 members when merged.
This means the 190 advisers will have approx 1578 members to look after each.
My understanding is that ASIC are recommending that advisers probably cannot deliver the level of advice required if they have more than about 150 advice clients.
This appears to highlight that every Aware Financial Services Australia adviser is responsible for 10 times the ASIC recommended number of active advice clients.
Oh, that’s right…..
Aware Financial Services Australia is being paid a fee from all the 300,000 members but may only be delivering advice to a small percentage of those members.
Tell me how on earth this different to an adviser receiving a grandfathered commission payment for the provision of advice and access for both the employer or super fund member in relation to the specific fund account including benefits, investment options, insurance benefits, nomination of beneficiary, contribution strategies etc etc.???
In principle, there is no difference whatsoever.
The problem lies within the Corp Act and the SIS Act.
This is a disgrace.
So the Industry Funds can charge all members an “access for advice” fee, without seeking informed consent & with no requirement to seek bi-ennial Opt-Ins from fund members, whereas their retail competitor advisers are buried in red tape bureaucracy continually chasing informed consent/Opt ins – sending them broke. This is a massive industrial relations issues, as the inequity in this arrangement (against retail advisers) is breath-taking. The playing field here is as level as the Himalayas.
Yep exactly, what legal process is there to fight this ?
ASIC are completely Corrupt, their Regulatory Capture to support everything Industry Super and kill everything Real world advisers is a disgusting misuse of power.
Real Advisers must demand change.
Not only that they stop clients from using external planners and they stop clients from being able to pay for that service but allow their own advisers to charge fees service from the clients account trustee best interest sorry I mean self interest
If the industry funds were serious about looking after clients they would let any planner in the country give them advice.
I work for an industry fund, and your statement is utter codswallup.
Pity you can’t spell. The correct terms are “union fund” and “codswallop”.
Aware Financial Services Guide Issued 14 Sept 2020.
” As Aware Super and Aware Financial services are issuers of financial products, we are not able to refer to ourselves or our advice as ‘independent’, ‘ impartial’ or ‘ unbiased ‘.
Aware Super’s products are included on our approved product list and may form part of the financial product solution.
While there may be other products on the market that may also suit your circumstances, our financial planners will recommend products that we or Aware Super issue.
Simple Superannuation Advice
For eligible members of Aware Super, simple PERSONAL advice on their existing superannuation interest can be accessed at no additional cost. Aware Super pays us a fee to provide this service.The cost of providing this service is deducted out of the administration fee Aware Super charges its members.
Alternative Forms of Remuneration.
Our financial planners, Executives and Directors may receive the occasional gift or invitations to events from a product provider or referral partnership, although this is rare.
A percentage-based fee for ongoing advice of up to .75%p.a..
This is calculated on the value of assets in the following products: Flexible Income Plan, Allocated Pension, Term Allocated Pension, Transition to Retirement Pension, Tailored Super Plan, Personal Retirement Plan, Investment Fund A and Investment Fund B, up to the maximum advice fee of $8000 (including GST).
All in house products of which Aware Financial Services also receives the product admin fees plus the advice fees.
So, here you have a situation where the employed planners are remunerated via all fund members being charged a fee for so called simple superannuation advice with many never receiving advice, an in house products APL that not only will control the recommended product but may well also provide an ongoing advice fee of .75% p.a. if a recommendation to effect the in house product is completed, a situation where the planners or executives may be receiving other forms of benefits such as gifts, and access to events and the planners, can charge initial advice fees of up to $8500 (including GST) plus the receipt of insurance commissions at 66% initial & 22% renewal.
A product issuer that makes a specific reference that even though there may be other suitable or even more suitable products available, the recommended product will be those that they issue and those they receive product fees from.
Do these planners get an exemption from BID because they are paid a salary or because the Corp Act allows the carve out to salaried planners because the payment of the base salary is not considered to influence the advice ?
What about the payment of incentives above the base salary ?
How can it possibly be argued that if the in house product will dominate the advice recommendation, the salaried planner paid by the product issuer is not being influenced regarding the advice ?
The playing field is about as level as the Himalayas.
Excellent comment. Worth reading in full – quite outrageous what is possible if you have a good reputation.
The quoted figures only relate to employment costs for their [i]licensed[/i][i][/i] advisers.
Most union fund personal advice is actually given by [i]unlicensed[/i][i][/i] workplace sales reps and call centre staff. The “advice” usually consists of no more than “rollover all your super into our fund because we don’t pay commissions”. It is misleading & deceptive. It is a breach of the Corps Act. It causes great consumer harm in many cases, particularly when people lose valuable insurances. And it is totally ignored by ASIC.
This is the reason for the gap between $104M advice related revenue, and $26M in licensed adviser costs. Most of the advice revenue is funding illegal unlicensed advice.
Good return on your Advisers salaries when you consider First State issued $1.1 billion of junk bonds to buy StatePlus and then writes them down by $400 million because Stateplus charges fees for no service. Using advisers to sell those written down bonds held within their so called “Balanced Funds”, turns out to be a good investment. What’s the difference between Dixon Advisory selling US property funds or Sam Henderson selling his own SMSF products? Answer; it’s only a crime if you lose money, but not if you’re an untouchable Super fund and you write them down. Compare that approach even with ASIC closing Dover.
Also one of the largest culprits of Fees For No Service. Even factoring in remediation, in-house sales are clearly worth it.
Hidden Commissions paid by even member Subsidising Advice services, not just Intra Fund vertical sales, but full Advice vertical sales too.
How much more conflicted can it get ASIC.
How big is the Fees for No Service rort that is Industry Super Advice / Sales.
The Hypocrisy is staggering.
The Regulatory Capture Corruption from ASIC to Industry Super is on a huge scale
Have a look at the Aware Financial Services Australia Financial Services Guide.
Incentives on top of salaries paid for certain criteria being met, invitations and gifts provided is a possibility, .75%p.a trail fees paid regarding the provision of personal and not Intra Fund advice, fees for Intra Fund advice paid to Aware from the admin fees charged to all fund members.
Does that mean Aware receive all the admin fees charged to the relevant fund members and only provide Intra Fund advice when contacted or requested ?
I’m not sure what the purpose of this article is, they spent 26M on salaries but they wrote 104M in advice fees. Sounds pretty sustainable to me
The point is the massive hidden commissions from all members that pay for advice for a few and cross subsidies to pay for the so called full advice.
It’s a complete rort
How many clients do you think were recommended to establish an SMSF or rollover to AustralianSuper to save fees?
Answer: zero.
Wow, those salaries look attractive. Much harder to make this kind of income in the self employed environment. And we are the ones that ned to be scrutinised??
Really? I have a relatively new business and pay myself at the top end of that scale, I do work damn hard but my fee structure and client base is on the lower end.
Very wide range of adviser incomes. I bought a book from an adviser – gross $80k, net under $60k. Others make a lot more than the salaried advisers and anything in-between. Those wages are very healthy, though, as the work is exceptionally boring and undemanding. You can’t recommend insurance and only in-house products.
might as well flip burgers for $60k
This intra fund advice rort must not be allowed to continue.
so you’re saying the 10 – 14 intrafund advisers are paid $26 million?? the intrafund is a drop in the ocean in comparison.
‘Advice spend’??? No, this is a marketing and customer retention expenditure. What next? Will pharmaceutical companies be permitted to employ doctors and pharmacists to flog their medicines?