MySuper must be considered with FOFA: CSSA
There is too much crossover between MySuper legislation and Future of Financial Advice (FOFA) legislation for the two to be considered separately, according to the Corporate Super Specialist Alliance (CSSA).
One area where the two are linked is the insurance service fee. As part of its submission to the Parliamentary Joint Committee on the MySuper bill, the CSSA said the removal of commissions for group insurances inside superannuation effectively prohibits payments to advisers for the services they provide to employers and their employees.
"Removal of commissions will create an unlevel playing field and could result in advice to a consumer that sees them using a less appropriate insurance solution," the CSSA stated. It could also create a distortion in the market, with commission being paid on group insurance outside of superannuation but not inside, potentially leading to inappropriate solutions being offered to clients.
The CSSA proposed to allow an insurance service fee on a "dial-up" basis where insurance services are provided to a MySuper employer group.
An explicit Insurance Service Fee, which defaults to zero, could be charged to all members at an agreed percentage with the consent of the client at the workplace level, the CSSA proposed.
The CSSA also said that member accounts should only be transitioned to MySuper accounts with the consent of the member. The transition should not occur automatically because this could result in changes to investments or insurance coverage.
The CSSA said the intra-fund advice fee needed to be explicit and transparent. It should be negotiated at the workplace level in response to the amount of services required by the members of the MySuper fund, while personal advice should continue to be paid for by the individual receiving the advice.
The legislation currently states MySuper funds can't be tailored for individual employers making contributions for less than 500 staff, but the CSSA argued that if there must be a limit then 50 is a fairer number.
The CSSA also called for the introduction of an explicit fee within a MySuper fund to allow for the ongoing provision of education and services to fund members. Currently, the removal of commissions and lack of an option for a plan-based fee means corporate superannuation specialists will have to withdraw from the workplace.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
