Call for transparency on super advice conflicts

With superannuation funds likely to start delivering personal financial advice, consumers need to be under no illusions that what they’re hearing from an adviser might be biased, according to the Certified Independent Financial Advisers Association (CIFAA).

Releasing the details of the CIFAA submission responding to Treasury’s consultation around the Quality of Advice Review legislation, the organisation’s chair, Graham Sale, said many might be surprised that the CIFAA was urging that Fee Disclosure Statement be strengthened rather than removed.

“CIFAA argues that it’s position is to ensure consumers are not left worse off by the announced changes and that it flags other areas of attention for future legislation, expected to cover Statements of Advice and other existing requirements.

“CIFAA’s position has always been to promote policies that benefit consumers. We’re concerned that the proposed QAR legislation opens the door for consumers to become confused and not fully comprehend what total fees they are paying” Sake said.

This was based on CIFAA concern that family units with multiple investment accounts could end up with pages of consent documentation with nothing really spelling out total fees.

“A consolidated Fee Disclosure would meet the objective of clients being fully informed about their total fees. What’s proposed is a mish-mash of different documents, no standardisation and different funds with different interpretations” Sale said.

“Advice fees relating to superannuation assets are simply another data field which could easily be reported to the ATO. They can then appear in the client’s MyGov portal under the superannuation tab, allowing members to easily see the fees paid for advice through superannuation funds.”

Within its submission CIFAA also called for the “biased advice statements” to be made front and centre for all communications between non S923a providers and clients.

“One of the key issues identified in the Royal Commission was the conflicts generated by vertical integration. More than ever and with funds about to start giving personal advice, consumers need to be under no illusions that what they’re hearing from an adviser, could be biased,” Sale said. “CIFAA argues that the only way those conflicts can be effectively nullified is for consumers to engage with genuinely independent financial advisers who comply with S923a.”

CIFAA has also called for a toughening up of ASICs interpretation of S923a by prohibiting independent advisers from charging their clients asset-based fees.

“Where flat fees are being charged, consent agreements should only be required on implementation and where there’s a change in the annual fee.”

“Unlike asset-based fees, our fees stay the same unless there’s agreement between client and adviser for a change. The enhanced MyGov fee disclosure mechanism recommended by us will at least allow people to easily see what’s being charged for advice” says Mr Sale.

CIFAA also says that independent advisers should have easier access to super fund data.

“There should be a standardisation of data access requirements across all funds rather than each fund having their own rules, which just slows things down and adds to consumer costs” Sale said.

“Independent advisers have no interest in moving the funds to a new fund because they’re not selling a new fund. For that reason, we think a certain type of privilege should exist where once independence and privacy clearances have been established, Independent advisers should have streamlined access to information” he said.