Richard Gilbert
The Industry Super Network has renewed its call for the Federal Government to impose further requirements on financial advisers.
According to the executive manager of the Industry Super Network, David Whitely, the Government should address the “structural corruption” of the superannuation industry by regulating financial advisers to act in clients’ “best interests”.
Any increase in super contributions in the 2008 Budget should be linked to three major policy reforms of the superannuation industry, Whiteley said in a speech to the Melbourne Financial Services Symposium.
However, Investment and Financial Services Association chief executive Richard Gilbert said such a move would be “completely unworkable” and a “litigation nightmare”.
“I don’t know of any other country in the world where they have used the term ‘best interest’,” he told Money Management. “It doesn’t matter who the client is or who the adviser is … it will always be said ex post that a client could have got something better, because the word ‘best’ always means that there is nothing better.”
However, Gilbert agreed with Whiteley’s suggestion that super funds should be able to provide some financial advice to their members.
Whiteley told the symposium a comprehensive default fund should be created for workers who do not actively choose their fund and that super funds should be able to provide limited financial advice to their members. He also said that new incentives, such as regulation, should be provided to encourage financial advisers to act in their clients’ best interests.
The superannuation industry enjoys a tax-preferred status of $26 billion and annual compulsory contributions exceed $46 billion. Nearly $1 billion per annum of these compulsory contributions are paid to financial advisers as sales commissions, Whiteley said.
Industry Super Network has long campaigned for a complete ban on the payment of sales commissions to advisers but neither of the major parties has indicated they would support such a measure, Whiteley said.
