Make intra-fund advice opt-in

Intra-fund advice should be included in the opt-in debate due to a lack of transparency regarding the way industry super funds finance it, according to Association of Financial Advisers chief executive Richard Klipin (pictured).

Klipin criticised the bundled administration fees that fund various services including intra-fund advice, claiming there was no ability for consumers to understand what they were paying for and what they were getting.

While supporting the move by both retail and industry super funds to set up advice capabilities for members, Klipin said he believed a certain amount of hypocrisy existed within the industry super fund sector, referring to its aggressive campaign for the introduction of the opt-in proposal as part of the Future of Financial Advice (FOFA) reforms.

“If opt-in is good for clients of financial advisers, then it should be just as good for members of all superannuation funds,” Klipin said. “All superannuation funds [charging a] bundled administration fee (which includes advice) should have all their members opt-in every year.”

Funds like the AustralianSuper, LUCRF, HESTA and legalsuper have an in-house general advice offering and market it to members as ‘free’ on their websites. These funds’ Product Disclosure Statements and/or Financial Services Guides explain that their general advice services are funded by client administration fees.

However, the Association of Superannuation Funds of Australia chief executive officer, Pauline Vamos, defended the manner in which super funds financed their intra-fund advice services, saying they were like any other service offered by the funds, such as call centres and websites.

“The provision of advice is a core service of many superannuation funds and as a core service it’s paid for out of the administration fee,” Vamos said.

Both Vamos and LUCRF chief executive Greg Sword agreed that much of the financial advice offered through industry super funds consisted of education and general information.

“You’ve also got to understand that we haven’t increased our fee to provide this new service – we are offering it within our existing cost base,” Sword said.

Sword added that the need for complex financial advice about super that was worth paying for was a myth.

“Let’s face it, financial planners make a lot of money out of advising people which fund to be in, and that’s not really the sort of advice which is helpful,” Sword said.

Klipin claimed that advice could not be equivalent to services such as websites and newsletters, calling for a level playing field between industry and retail sectors.

“[Advice has] got its own rules and requirements which intra-fund advice and trustees have been given relief from and this brings us to the unlevel playing field, which we think is [contrary to] the interests of most consumers,” Klipin said.

“It puts an unfair advantage to certain providers of advice where they can and currently are bundling and cross-subsidising fees and charges to provide services.”