Confirmed: Super fund personal advice fees range from $470 to $4,500
The reason superannuation funds see themselves as a vehicle for the delivery of financial advice is explained by a survey of 19 funds which revealed that fees for full personal advice can range from just $470 to $4,500.
The survey, conducted by the Association of Superannuation Funds of Australia (ASFA) as part of its submission to the Quality of Advice Review (QAR), has not only revealed how the funds approach advice provision, but where it is concentrated.
What it is more, the survey reveals that funds have increasingly sought to take advice provision in-house.
It reveals that all 19 of the funds who participated in the ASFA survey provided general advice, 84% provided intra-fund advice and 60% of funds provided full-service personal advice.
In terms of fees and charges, the survey revealed the minimum fee for scaled advice varied from zero to $1,750, with a median fee of around $350. For full personal advice the minimum fee varied from $470 to $4,500 with a median fee of around $2,500.
It said many funds also support payment of advice fees in relation to advice provided to a member by an external financial advisor.
Interestingly, the survey revealed that superannuation had generally made only modest use of digital or web-based advice, albeit 90% of funds provide a calculator which forecast the retirement balance and/or income for their members.
“Funds make use of a variety of methods to deliver advice. These range from direct provision by an in-house call centre operated by a fund to using a third-party specialised provider of financial advice. In-house advice provision has become more common that outsourced arrangements,” it said.
“There is some use of web-based systems for delivering advice but only 28% of the funds surveyed utilise online tools to generate statements of advice (SOA),” the survey found.
“Funds provide advice to members on a broad range of topics related to the interest of the member in the fund and, in some cases, their broader financial circumstances,” the survey analysis said.
“These range from retirement planning and transition to retirement strategies to decisions about contribution levels, investment choice and insurance coverage. All the funds surveyed provide advice on matters relating to retirement incomes.”
The ASFA analysis said that “in providing advice services to members, the superannuation industry engages a subset of the total universe of financial advisors”.
“Approximately 90% of advisors licensed to provide personal advice can provide advice on superannuation products. However, only a small proportion of these would be directly employed by a superannuation fund.”
“For superannuation funds, there are a number of ways that trustees can structure their advice capacity, through a combination of in-house and outsourced advisors.”
“With respect to the retail sector, the large commercial financial services institutions can have significant networks of financial advisors (often comprising multiple dealer groups). These organisations provide advice services to fund members from multiple funds.”
“Some of Australia’s largest industry and public sector superannuation funds have significant in-house advice capacity. In another form of in-house advice, some funds directly employ advisors that are licensed with other organisations. However, the extent of this practice is difficult to determine as it is not captured in the ASIC data.”
“There is a range of third-party providers in the market. For many organisations that provide services to fund trustees, advice services represent just one of those services. For instance, Mercer has around 40 licensed advisors and Link has approximately 50 licensed advisors. Industry Fund Services is a source of outsourced advice (and other services) for industry funds and has around 110 licensed advisors.”
“Some superannuation funds have combinations of the above models. For example, some funds out-source the provision of comprehensive advice to their members, but retain intra fund advice services in-house.”
Wow, there’s a lot to unpack here.
“in some cases, their broader financial circumstances”
Well if this is paid for by the members interests this is a breach of the sole purpose test for the SIS Act.
If this is paid for out of the superfund reserves it is a breach of the fiduciary duty of the trustee of the fund for utilising members interests to fund advice for others. i.e. cross subsidisation.
“decisions about contribution levels”.
This is a breach of the FASEA code if they don’t consider the wider impacts of their advice and all the needs and circumstances of the client. Eg paying down debt, provisioning for school fees, funding a renovation through savings or new debt in the future etc.
And if they do comply with FASEA then we are back to breaching the sole purpose test.
I am all for a model whereby ordinary Australians can get basic advice. I am vehemently opposed to vertical integration as it is the single biggest contributor to all the problems that have beset advice. I am gob smacked that the conclusions have already been reached and as much as Michelle Levy tries, her efforts will be seen in history as nothing but a wall paper job to give the bank and union funds what they had, then lost and will now likely retain into the future…….. A sales channel for their products. This disgusts me.
It CANNOT be allowed that the product producer provides the advice, there are just too many inherent conflicts.
Very well said, Wildcat !
If you actually read the article, it says nothing about the full fee being taken from the Super Fund, rather just what the range and median of fees are across different advice. There is nothing in the article to suggest Sole Purpose test is not being followed.
The article also says super funds are supportive of being able to facilitate payment to External advisers – ie not just the perception of internal product floggers.
You are kidding yourself if you think the biggest contributor to the issues of our industry has been vertical integrated advice. The issue has and always will be conflicted interests such as 100%+ upfront insurance commissions, asset based fees, Volume bonuses, hidden commissions, Fees for no service, lack of transparency on benefits and generally speaking a large proportion of generational insurance salespeople mascaraing as financial advisers.
Unfortunately for those of us who have done the right thing and have genuine relationships with our clients this has resulted in incredible amounts of unnecessary red tape, massive increases in cost to service and large declines in the values of our business. The industry cant survive without change.
In general mortgage brokers are not part of a vertically integrated structure, but clearly they are still heavily influenced by built in commissions and borrowers interest rarely put first. No one model is perfect.
Surely the solution is transparency and education of clients – do we really think our clients are too dumb to understand and make informed decisions
I partly valid reply, but if a super fund charges their average of $2,500 for personal advice but the cost to serve is actually say, $5,000 (wages, overheads, offices, software etc), then isn’t there a ‘hidden commission’ in that? Or where there is likely to be little consideration of an alternative super fund, isn’t there an inbuilt conflict of interest? How about the fact that some of the larger Industry Funds reduce the % allocation to ‘Growth’ assets, of their unlisted investments thereby getting their fund ranked with more conservative alternatives? Don’t you see these as sales tactics in order to ‘flog more product’?
Have you tried recently to be paid by a large IF for advice to one of their members, in relation to that fund? More hurdles than the Olympics..
If your clients are too dumb to make informed decisions because they don’t undestand the advice – there’s your massive breach of the code…
I disagree… Let’s look at your argument:
I don’t know any adviser who does not provide a transparent solution to a client’s needs and as I spoke above, I believe the benefits of helping clients understand their investments and investment markets is immeasurable.
I was attracted to this article because I thought we were going to get some figure on the Industry Fund costs of Intrafund advice, or at least some sort of breakdown between those costs and what they charge clients for full advice, but I see that is still not transparent.
The biggest contributor to the issues of our industry has been vertical integrated advice. You can’t worship two Gods, and when the product manufacturer pays the wage, the client will always come off second best. Product providers should be excluded from advice.
“Transparency and informed decisions” is the flawed philosophy that gave us FSG, SoA, PDS, RoA, FDS, and TMD. It simply doesn’t work. Unfortunately most clients are indeed too dumb, or disinterested, or distracted, or time poor, to make good decisions on the basis of transparency alone. They need to be guided by an expert acting in their best interests. That is ultimately what professional advice is all about. It doesn’t matter what the payment method is, as long as the advice puts the client in a better position.
It is entirely possible to provide conflicted, inappropriate, advice that puts the client in a worse position, via fully transparent fee for service. A lot of SMSF advice given by accountants falls into this category.
Out of the 23 industry funds (numbers now going down due to consolidation) only about 4 of these fund allow external advice fees. The super fund makes more money when the super funds restricts they are the only ones allowed to give and charge clients to pay for internal advice only.
Most of the industry funds have salaried advisers are licence through Link, I think there is like 87 financial advisers and the rest are backpackers giving general advice. Link restricts the personal advice from each of these advisers are allowed to give so its limited to each fund…. no conflict of interest to be seen here?
Why is no one talking about all the under performing funds giving intra fund advice charging all the members, I wonder how good that intra fund advice is? wonder how many clients were told to leave the under performing fund.
Profits over access to face to face advice.
Intra fund advice is by definition advice about a members interest in the fund. Intra fund advice is often paid from the administration fees due to the fact that its scaled. This limitation is clearly stated in the SOA and understood by the member as that is all they are seeking. These are the people unwilling to pay either their super fund or a non aligned adviser thousands for comprehensive advice. Not much different to phoning Netflix hotline about your account, you dont want to hear about what Stan offers. As a former adviser I value advice but don’t for a second think that the wider population has the same appreciation. The members that super funds service are unlikely to be your potential clients, they just aren’t in that market.
Didn’t read beyond the below sentence because they have obviously just said what they thought someone wanted to hear. Getting an external advice fee paid from an industry fund is a nightmare.
It said many funds also support payment of advice fees in relation to advice provided to a member by an external financial advisor.