New outlook on advice for industry funds
Just over a year after the introduction of new intra-fund advice rules, there has been a “significant strategic shift” in the positioning of financial advice services by industry super funds.
That is the bottom line of a report compiled by the Industry Super Network (ISN) following consultation with its members on the provision of advice services.
“Industry super funds have long been criticised for being ‘anti-advice’ because of their long running campaign against commissions and other forms of conflicted remuneration which are typical in most financial planning businesses,” the report stated.
“However, in the next decade it is likely that superannuation funds will become major players in the provision of financial advice through the provision of intra-fund advice services. Members of funds stand to significantly benefit through the receipt of advice on their super which is very low cost and delivered in their best interests, particularly where they are engaged at a younger age.”
ISN reported on a range of different pricing models currently being used by industry funds to deliver this advice. The group said most intra-fund advice (on the topics of contributions, investment choice and insurance) was being provided at “no direct charge to the member”, but consumers do pay via their funds’ administration charge. ISN said some funds have an annual cap on members’ access to free advice. Others charge a one off fee between $200 and $500 for simple advice on topics such as transition to retirement.
The report said because most funds are still developing or piloting their intra-fund advice services, they are “not yet in a position to make a final decision on the charging and funding of their services”.
“Nearly all funds charge members on a fee for service basis for full financial planning services, ranging from $1,200 to $3,000 depending on the complexity of the advice,” the report stated.
“Most funds facilitate the deduction of advice costs from the member’s super account, where the advice is super related and falls within the sole purpose test. None of the funds pay or receive any commissions or volume based payments in relation to the advice services provided.”
In its report, ISN is careful not to appear to encroach on the stomping ground of financial planners. The group argued that, over the longer term, intra-fund advice would lead to increased demand for traditional financial planning services, while financial planners would also adapt to offering simple advice.
The group pointed to research it commissioned from Rice Warner Actuaries that suggested by 2024 there would be more than 3,400 advisers supplying simple advice, with the market for this growth coming chiefly from industry fund members and bank customers.
And, while there was “considerable resistance” to the publication of RG200 by retail super funds, ISN believes the retail sector is now also acknowledging the benefits of intra-fund advice services.
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