Extend intra-fund and limited personal advice say super funds

Intra-fund advice should be enhanced and the underlying legislation expanded to allow superannuation funds to advice on a wider range of issues, particularly retirement income products.

That is one of the core recommendations provided to the Quality of Advice Review by the Association of Superannuation Funds of Australia (ASFA) which is also recommending that intra-fund advice relabelled to become “fund advice” so that consumers understand that it is financial advice provided by, and in relation to their superannuation fund.

ASFA also wants changes to create greater certainty around the provision of limited personal advice unhampered by undue compliance requirements and is advocating for the removal or rationalisation of the safe harbour test.

The organisation is also arguing that advisers be allowed to provide advice under a Record of Advance (RoA) rather than a Statement of Advice (SOA), claiming this could see the cost charged to superannuation fund members reduced from an average $1500 and $2500 compared to an average cost of $300 to $500.

ASFA is arguing for what it calls a “modest expansion” of section 99F of the Superannuation Industry (Supervision) Act to achieve the enhancement to intra-fund advice.

“We note that there is currently a level of uncertainty regarding the scope of the matters specified in section 99F, for example, when advice may be deemed to be ‘product replacement advice’ and outside section 99F. We recommend that additional clarification is provided to ensure consistency of approach across the industry,” the submission said.

“We propose that it would continue to be up to fund trustees to determine whether advice on eligible matters is treated as ‘fund advice’ and collectively charged to members of the fund or treated as limited ‘personal advice’ and charged directly to the relevant member.”

On the question of ongoing fee arrangements, ASFA is also arguing that consent for ongoing fee disclosure be managed at a product platform level for superannuation funds.

“ASFA acknowledges that the recent reforms requiring consent for ongoing advice fees are aimed at ensuring consumers understand the fees they are paying and the advice services to which they are entitled, and we consider it important that there is transparency to these matters,” the submission said. “However, feedback from ASFA members suggests the reforms have been implemented in a way that disproportionately increases advisers’ costs (and therefore the costs that flow through to the consumer).”

“Consent is required at the superannuation account level, whereas in practice a superannuation fund member may have multiple products within a fund and therefore more than one account. This means that fee disclosure documents can become complex and not able to be automated. In ASFA’s view, the consumer protection objective could still be achieved by limiting the consent arrangement to the product platform level, rather than applying separate consent requirements where multiple superannuation accounts are held by the member.”