Corporate super advisers seek new model
Corporate super advisers will need to team up with super fund administrators to ensure a continuation of their revenue stream as a result of the combined effects of the Future of Financial Advice (FOFA) changes and MySuper.
This comes amid talk of some advisers choosing to abandon their corporate super business due to the difficulty of being appropriately remunerated within the new legislative guidelines.
Advisers’ planned service fees which are currently paid by corporate super funds will be banned under FOFA, with corporate super advisers left to figure out a method of payment or stop delivering those services, according to Douglas Latto, chief executive of Corporate Superannuation Specialist Advisers (CSSA).
He said administrators could outsource relationship management services (RMS) to corporate super specialists in order to separate advice and service fees.
“It’s not personal advice; this is providing services to the members, and the funds will be outsourcing those to corporate super specialists to do,” Latto said.
“It’s a business-to-business relationship so it’s the administrator of the fund outsourcing those services to a corporate super specialist firm like ourselves and others, and they will have a payment agreement.”
Latto said the issue could be resolved via two methods - either outsourcing RMS or outsourcing intrafund advice.
Colonial First Choice will provide intrafund advice to corporate super advisers with a payment model of up to $80 per member, Latto said, but that was the only payment plan which had gone public.
“One is an outsource of advice and the other is an outsource of services,” Latto said.
“What that will do is eventually replace all the commissions, plan fees, and insurance commissions that we receive from group insurances.”
Latto said advisers in situations where corporate super only made up a minor part of their business would need to decide whether or not they wanted to comply with the Australian Prudential Regulation Authority’s strict outsourcing rules.
“They’ll have to make a decision; you’re not cutting them off, you’re just saying this is the standard now that you have to meet,” he said.
The implementation of MySuper would also conflict with the end of grandfathering arrangements, with the new default system coming into play at the beginning of 2014 and an end to grandfathering occurring mid-year.
Association of Financial Advisers (AFA) chief executive Brad Fox said the combination of FOFA and MySuper would change the corporate super landscape.
“When the legislation is all put together, it makes it very difficult for a corporate super adviser to offer anything like the service they used to, and this appears to be an unreasonable outcome which will affect a lot of consumers which are inside those sorts of funds that want that sort of advice,” he said.
Latto and the AFA’s Phil Anderson said the Government was also working to nut out issues relating to conflicted remuneration and corporate super.
“We’re trying to find a solution that allows them to continue to operate not exactly as they have been in the past, but which allows them to continue to be available to provide services to employers and the members of corporate funds ... either through regulation or getting some relief via the Australian Securities and Investments Commission - and all of those things are on the table,” he said.
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