Intra-fund advice not immune to cost pressures

industry-funds/cooper-review/FOFA/government/australian-securities-and-investments-commission/financial-advice/trustee/

20 October 2010
| By Lucinda Beaman |
image
image
expand image

Analysis from Citigroup has highlighted the fact that providers of intra-fund advice will not be immune to cost pressures if the Government is successful in expanding the definition of intra-fund advice.

The Citigroup analysis points to a ‘considerable expansion’ of the definition and scope of intra-fund advice since the introduction of the original, narrow definition given by the Australian Securities and Investments Commission (ASIC).

The proposed expansion of the definition to include advice on topics such as transition to retirement strategies, as well as an expectation that super funds will proactively deliver these services, will ultimately drive up costs.

“The Government appears set on expanding the scope of topics that can be covered by intra-fund personal advice. Both the Future of Financial Advice [FOFA] policy statement and the Cooper Super System Review assume a broader definition than currently defined by ASIC,” the report stated.

The FOFA reforms seek to allow intra-fund advice to extend to transition-to-retirement and other strategies, as well as retirement planning generally. The Cooper Review recommended the expansion of intra-fund advice into the realm of “more expensive personal advice”. The Cooper panel also suggested intra-fund advice be provided to super fund members every five years on average, reaching a total of 14 pieces of advice over the life of super fund membership.

Citi’s analysts said these projections, and the expansion of the scope of advice, would result in an increase in the cost of the advice. This calls into question the ability of funds implementing the MySuper proposals to reach fee levels of 66 basis points (at a scale of $20 billion).

The report stated that the costing of advice contained in the Cooper Review was based on Deloitte analysis, which the Citi analysts believe was based on ASIC’s original, narrow definition, rather than the proposed expanded definition. The Deloitte analysis also refers to circumstances in which fund members seek out advice, as opposed to a proactive stance from the trustee.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 1 week ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks 1 day ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

2 weeks ago

One licensee has lost 27 advisers in the past week, now sitting at zero, according to the latest Wealth Data figures....

3 weeks 1 day ago

TOP PERFORMING FUNDS