The survey – conducted by Industry Super Australia and the Australian Institute of Superannuation Trustees – found that more not-for-profit super funds are providing small scale, affordable advice to members with no commission to financial advisers.
The survey predicts advice services in this sector are likely to grow by 43 per cent over the next four years.
“The key difference between financial advice services in the not-for-profit sector compared to the retail banking sector is that it is not about selling products,” said ISA deputy chief executive Robbie Campo.
“In the all-profits-to-members sector, the purpose of financial advice is to improve the retirement outcomes for members by always acting in their best interests.
“Combined with the outperformance of industry super funds in the last year, the results of this survey further demonstrate the value of the all-profits-to-members model of superannuation fund governance.”
Not-for-profit super funds delivered 130,451 pieces of financial advice to their members during 2013-14, the survey found, and offered a “spectrum of advice services” in a range of ways.
The survey results indicate that the promise of FOFA is being fulfilled, Ms Campo said.
“The intention of the FOFA reforms was to deliver greater access to more simple forms of financial advice – and for that advice to be high quality and in the client’s best interest,” she said.
“Our members are more likely to be younger and with lower super balances. The survey shows that funds are delivering simple, scaled advice that meets the needs of many people who in the past might not have gone near a financial planner.”
AIST chief executive Tom Garcia said that not-for-profit funds recognise the increasing value that affordable and accessible advice has to members.
“Not-for-profit funds are working hard to make sure that members have access to affordable financial advice,” he said.
“The 19 funds we surveyed ran almost 18,000 workplace seminars and 16,000 general seminars and webinars in the last year alone.”
Mr Garcia said the survey also showed that funds are increasingly tailoring advice to their membership demographics.
“The average age of members receiving advice was as low as 42 and as high as 60 depending on the fund. Members are most commonly looking for help in choosing an investment option or help with transitioning to retirement,” he said.
Um… the ‘financial advisers’ of the industry funds are only salespeople for their own funds. They only ever recommend their own fund, and even they don’t have full and proper access to understand the underlying assets in the investment options. With no independent research or anything resembling disclosure on Industry investments, how can any true adviser be comfortable recommending these?
@ Steve A
I have seen recommendations to retain retail with Industry funds (IF), but it’s not common.
The key think to note, is that the advice recipients of IF’s are existing holders of the product. The advice is, at its most complex, going to include rollover to pension to draw an income in retirement. Retirees aren’t interested in features/bells/whistles and the fund fits the purpose.
So the target clients of VI firms and IFs are different. IF’s don’t generally see clients with complex needs, those clients will generally seek a planner on their own.
Either way, I think you should relax your cynicism and give IFN some credit for recognising some value in advice at the very least.
At the end of the day, all advice is conflicted in some way. It’s unavoidable no matter what. But its about how you manage your conflict. From my experience IF advisers (on the most part) do a good job disclosing the limitations of products and advice to manage the conflict effectively and let the consumer make an informed decision.
By the way (not to rub it in) – The golden “know your client/product, appropriate advice” rule actually did change. The 3 rules were part of the “Suitability test” which was repealed and replaced with BID.
I often leave a portion of clients money in their industry fund and let contributions continue there (to retain insurances and ease for employer) but generally will bring the lions share to a retail fund.
Fact is that with competitiveness these days, most retail funds fees are barely higher than most industry funds (always exceptions of course) but my advice and services are able to be lower via the retail fund (and as such lower overall fees for the client) because industry funds take so much extra time and effort to deal with.
You can’t link a planner, client authorities to allow me to get info often expire annually, there is limited or no online access to view/monitor accounts, understanding ‘credit rates’ (very different to returns – due to their use of reserves) is almost impossible, there’s limited transparency of what the underlying assets actually are, their call centres are full of new/young/overseas/incompetent people (as are most retail funds, but with retails funds I can access priority service, team leaders, BDM’s, etc to assist me with issues).
I can’t take any fees from the industry fund, which is often the clients preferred method of payment.
Let’s also consider that “not for profit” means less to invest and innovate in back office services and new innovative features versus for profit who invest millions into this, so most retail products actually are better, more flexible, more usable.
And don’t give me that ‘returns are better’ crap. Reserving distorts their returns and good advice CAN add value to returns and down turns and negative returns can be great when building retirement savings due to buying in low!
SORRY, other than insurance, is there any reason to use the average industry fund???
IF a 2014 BMW was only a few bucks more than a 2004 falcon, I’d get the BMW!!!
[quote name=”Reality”]@Steve A
You are right… It is no different to vertical integration… You aren’t going to see a bank adviser recommend rolling out of a bank owned super fund to anything else.. No different in IFA world…
Then again at least the bank super fund is likely to be a wrap and have much greater features and access to a variety of investment managers…[/quote]
I have actually seen bank advisers recommend consolidation of funds into an Industry Fund and I have done it myself where appropriate (i.e. in the clients best interest).
I am licensed under a VI institution and have never had any comeback from the licensee for making such recommendations. Maybe this is also true for ISN advisers – I’ve just never seen it.
@Steve A
You are right… It is no different to vertical integration… You aren’t going to see a bank adviser recommend rolling out of a bank owned super fund to anything else.. No different in IFA world…
Then again at least the bank super fund is likely to be a wrap and have much greater features and access to a variety of investment managers…
@Reality:
Glad to hear it if that is the case. I had the opportunity to use the software that the ISN use for advice a couple of years ago.
It told me to rollover my (retail) fund to an industry fund even though the industry fund in question couldn’t provide most of the features that I specifically requested.
Maybe they have fixed this up – it was 2 years ago. However my cynicism is fuelled by the fact that I have never in 18 years in this industry seen an industry fund rolled over to a retail or SMSF fund at the suggestion of an ISN adviser.
@Anon:
Good advice has everything to do with meeting the clients needs. Since I don’t believe that one super, insurance, investment, lending product could possibly suit everyone, then I (perhaps foolishly) believe that good advice has quite a bit to do with products.
Perhaps you can convince the government to set up such products that suit everyone. Then we wouldn’t need any advisers, product providers, fund managers etc. This should reduce costs and eliminate conflicts of interest etc.
In the meantime, I’ll stick with the two rules that I learnt 18 years ago and haven’t changed in that time – “Know your client” and “Know your products”.
Hi Steve A,
From what I hear it actually isn’t uncommon for external insurance to be recommended via rollover. Completely agree in relation to the ‘limited’ advice that doesn’t consider other fund suitability.
@Steve A – Good advice has nothing to do with products. The number of product changes is not an indicator of whether advice is conflicted. I would say the opposite is true. This whole message board is filled with much hate towards industry funds about how intrafund advice is by default conflicted. How far from the truth that is, have you even read RG244?
“Conflict-free”? Seriously? How many times would they have recommended switching out of their own funds?
How many times would they recommend insurance with an external insurer with payments made via rollover from their own fund rather than their own crappy insurance (non-renewable, extremely limited TPD definitions etc)?
Do their “advisers” even know it’s possible to have insurance elsewhere paid by rollover?
Good to see the industry funds finally waking up to the value of advice. I think its time for IFA to do some self reflection and determine if the reputational damage caused by the “compare the pair” and similar adverts attacking financial advice is really allowing the trustees to truly act in the interest of their members.
As long as you don’t regard using superannuation to support union activities as a conflict.
Did I just read that correctly? The Industry Super Funds are telling us ‘it is not about selling products’. How utterly deluded and repulsive those comments are. Look at the amount of money they spend on prime time advertising, sporting sponsorships, political lobbying etc. Anyone who has been involved in financial planning for more than 2 minutes knows they have no interest in financial planning whatsoever, except as a tool for retaining client money. They deliberately undermine independent financial advice at every possible opportunity and they make it impossible for us to work with them for the benefit of their own members. They are product pushers, no different to any other, and their financial advisers are 100% conflicted. Come on IFA, please don’t insult independent financial planners by regurgitating such nonsense.
I typed a big long comment about all the reasons I detest Industry Funds and their BS advertising and PR, but you know what, I deleted it because all decent planners already know and don’t need to hear it from me.
SHAME ON YOU ISN for all your BS, including your snide comments in this article which IFA shouldn’t even be publishing.
I hope the regulators look into ISN operations and claims with a fine tooth comb and close them down.
POOR ETHICS & POOR ADVICE.
Most of their members come to them because they have no choice. Their performance figures are distorted due to the different base demographics and required asset allocations.
If retail funds and advisers were allowed to compete on an equal footing with these Union controlled vehicles clients would vote with their feet – and dessert.
“thanks to their conflict-free” HAHAHA!!
conflict free, when did that occur? Ever heard of corrupt unions?
No wonder this industry is imploding….
This is purely a propaganda piece.
Firstly 130,000 pieces of advice would hardly cover 6% of the membership of AustralianSuper, and much less across all not for profit funds so the take up is very low.
As for being independent of product(?), are they saying that each fund will not promote its own pension when selling transition to retirement? Will they promote membership of any other fund other than their own?
The implication is that they are acting in a member’s best interest and other advisers are not beggars belief.
hoo-rah! Long live ISA!
‘No commission to financial advisers’ What?
Not about selling products????? What a shameless lie. Its all about selling THEIR product alone. The term “conflict free” is also a blatant lie as the industry fund adviser would only recommend their own fund even if there was a better one out there – that is the exact definition of a conflict of interest.
100% conflicted = “conflict free”
Gee wizz must get a refund on my Webster’s as it obviously has the definition of convicted wrong
Will a not for profit super fund ever recommend a cheaper super fund??? I don’t think so. How can you work in the members best interest when you cant recommend all/any funds… I think a non aligned adviser might be the answer!!