AIOFP points to industry funds ‘golden gravy train’

Mike Taylor

Managing Editor and Publisher

11 July 2023

The Association of Independently Owned Financial Professionals (AIOFP) has again told members of the virtues of working with industry superannuation funds on financial advice delivery.

In a further message to his members, AIOFP executive director, Peter Johnston said he believed there was little to be served by fighting the growth of industry funds and it was better to embrace it.

“Industry funds have won the war against the banks and they arguably need independent/independently-owned advisers to assit their business model,” he said.

“Firstly, they are NOT ‘union funds’, yes they are favoured by the Union movement but around 50% of their Directors are from the Corporate/independent market and they give donations/support equally to both sides of politics….ie Unions and Corporates. They also have APRA watching them like a hawk,” Johnston said.

He then went on to claim that industry fund directors “don’t like the AFSL risk of having their own internal Advisers and they don’t like the cost”.

“For example, one IFS Division ‘rents’ Advisers to funds for $350,000 per Adviser per annum. Also, the political optics are Industry Funds, who criticised the Banks for having the highly conflicted vertical integration concept for 25 years, are now doing the same thing,” Johnston said.

“Simultaneously, APRA are pressuring them over their costs to maintain an advice service and the other optical negative is they are clipping 100% of Super members to fund an advice service where no more than 15% use it – that looks very much like a ‘fees for no service’ concept to some!”

“We think Minister Jones wants to go down the path of allowing internal staff to give information to fund members without the need to be licensed which makes practical sense – this gives the option of having in house licensed Advisers or outsource financial advice it to the independent advice market.”

“If a fund was facing the option of AFSL risk/cost of their own internal Adviser at say $200k+ or outsource it to an independent Adviser that keeps the account balance intact, works on a fee for service basis with the fund member [therefore no subsidisation, which is the way all advice should be] and may give inflows from their own business, what would you do?”