Planners cautious over switching advice

Marianne Perkovic

Many financial planners are declining to make superannuation switching recommendations due to a dearth of available research into individual funds, particularly industry funds.

That is one of the key elements to emerge from a roundtable of financial planners conducted by Money Management this month.

The advisers had been asked to comment on the circumstances surrounding the enforceable undertaking entered into with the Australian Securities and Investments Commission (ASIC) by AMP Financial Planning over the provision of superannuation switching advice.

The consensus among the roundtable panellists was that it was inevitable that one of the major companies in the financial planning arena would be targeted by the regulator in circumstances where ASIC had been perceived as “searching for a scalp”.

They warned that the publicity surrounding the AMP enforceable undertaking was having a negative impact because it made financial planners increasingly cautious about providing superannuation switching advice.

The financial planners pointed out that advisers, particularly those working in smaller firms, lacked the resources to fully investigate superannuation funds, with the result that many simply declined to undertake such an exercise for clients.

Laura Menschik of WLM Financial Services said that if a client came looking for information on a relatively unknown fund, it was often not worth the time and money involved in undertaking the relevant research.

“All of a sudden you are charging them one, two or three extra hours of your time just to try and get the figures and the comparison, and it might not be worth it for the amount that is involved,” she said.

Menschik said her firm had made the decision to say that it could not give a comparison unless the client is willing to carry the cost.

The new chief executive at Count Financial, Marianne Perkovic, agreed with the analysis that the time and costs involved in carrying out the research necessary to sustain superannuation switching advice was often unaffordable.

“The classic example we have is that someone will come in with $2,000 in a fund and there’s no research [on that superannuation fund], so the amount of time for the adviser to get that research for $2,000 is just not worth it,” she said.

Perkovic suggested that the industry funds should be prepared to co-operate more fully with financial planners to ensure enough information was available.

“Industry funds should change their attitudes and we should really work in unison because industry funds are often ideal for young people, but an adviser is not going to recommend it because we don’t have a reasonable basis for making that recommendation,” she said.