Vertical integration stifling competition
Another superannuation fund has claimed vertical integration and the influence of the major banks and AMP Limited has served to stifle competition and innovation and contributed to higher fees.
Victorian-based fund, Equip Super, which has provided its own financial planning services, has also claimed that advisers working within vertically integrated businesses may not be inclined to recommend the use of outside products.
"Australia's four largest banks, together with AMP, now dominate both the financial planning landscape and the retail superannuation segment," the submission to the Financial System Inquiry said.
"Large integrated financial groups such as these now account for some 40 per cent of total superannuation assets. In terms of financial advice, it is generally held that some 80 per cent of all financial advisors in Australia operate under a ‘dealer group' whose ultimate ownership and control rests with one of the four big banks or AMP."
The submission acknowledges that the provision of financial advice represents a key way of overcoming the complexity of superannuation but adds, "If, however, the advice provider is part of a vertically integrated business model, agency and structural issues may hamper the freer movement of funds".
"Whilst the implementation of the Future of Financial Advice (FOFA) reforms work in part to mitigate against agency/structural issues, recent regulatory amendments to FOFA suggest that these agency issues may still be a barrier to enhanced competition into the future," it said.
"It is also often the case that small and mid-sized companies drive many beneficial innovations. If the superannuation sector is dominated by too few providers the impetus to innovate might be unduly muted."
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