Will super funds replicate the sins of banks on advice?
The superannuation funds which for years have been critical of the banks’ highly conflicted banking vertical integration models of the past are now guilty of the same sin, according to the Association of Independently Owned Financial Professionals (AIOFP).
In a message directed to the Assistant Treasurer and Minister for Financial Services, Stephen Jones, AIOFP executive director, Peter Johnston described the situation with respect to the models pursued by the banks and that of the superannuation funds as being “ironic”.
The AIOFP message supported the ability of accountants to be allowed to give self-managed superannuation funds structural advice only with a need to be licensed to offer specific allocation, while it said superannuation funds should be required to out-source financial advice to the independent sector on a fee for service basis.
The message said the AIOFP supported the suggestion by Jones that he would seek third-party expert opinion on the Quality of Advice Review (QAR) final report “regardless of how long that may take” on the basis of the need for the minister to get it right.
What is more, the AIOFP sent a clear message to the chair of the QAR, Michelle Levy and “her supporters” to take as much time as is needed to get it right.
“The Minister has demonstrated a great deal of respect and courtesy towards Ms Levy from the outset by not commenting on any aspect until the final report is completed. It is time for Ms Levy and her supporters to demonstrate similar respect and reciprocation,” Johnston’s message said. “Time should not come into it, getting it right is the crucial factor.”
“Whatever the decision/direction the Minister recommends, there seems little doubt it will need to be at least a 2 – tiered systemic approach to cater for the diversity in the broader financial services landscape. One solution will never be enough, the ‘trillion dollar’ question however is which options will be selected.
“At this point it appears there are three distinct market opinions –
JAWG supporting QAR/LEVY in its entirety.
AIOFP wanting a hybrid version to protect consumers/Advisers.
CHOICE staunchly defending consumers as they should.
“The QAR/Levy option of reducing consumer protection and giving back legal flexibility to the Institutions is flawed in our view. CHOICE are understandably all about consumer protection [which includes Advisers in this cohort] and we believe our solution of not compromising consumer protection but allowing all stakeholders to operate adequately and fairly within the system is feasible.”
“The AIOFP does not support the Levy solution for one key reason, it dilutes protection for consumers by allowing the Institutions to operate under a ‘Good Advice’ environment, not the more stringent ‘Best Interests’ duty’.”
Johnston’s message said if institutions wanted to offer their products to the general market the product must stand on its own merits of price/performance and structure.
The Hayne RC was always about reducing competition for Super funds, regardless of their ownership. Reducing competition will always be bad for consumers. QAR simply reinforces that.
Completely agree with Peter Johnston’s statement
AIOFP….the next AFA after the current one merges with the FPA and disillusioned advisers want a new home whose sole purpose is to advocate, not to sell CFP designations.
The only problem is the AIOFP have a chequered past with some dubious members.
The recommendation to allow Super Fund Trustees the ability to offer direct personal advice is the greatest conflict of interest financial advice has ever seen.It’s completely unethical. Don’t put the fox in the henhouse. It will certainly repeat the sins of the banks.
Let’s not forget that Industry Super Funds and their trustees are ‘Single Product Manufacturers’. They are not trained ‘ethical’ advice providers.
They have a single purpose which is to increase investment in their single product. Allowing the trustees to effectively offer broad personal advice further cuts out choice for their members and locks out competition and the chance to receive comprehensive financial advice.
QAR recommendations are promoting a closed loop for these clients. It keeps individuals locked in and dumbed down, so they can continue to be fed Industry Suoer Fund propaganda.
Don’t repeat the mistakes of the past. Allow people choice to receive actual financial advice, not just form of advice that keeps individuals locked in to one high priced product.
Advice is not just about super. What about non-super investment, taxation, aged care advice, insurance, lending, estate planning, property, and basic budgeting. If you allow a ‘Single Product Provider’ (i.e. An Industry Fund) the ability to shield individuals from choice and competition, you run the risk of unethical behaviour by these product providers.
Ms Levy please don’t make this mistake. It will put us right back to pre – Royal Commission days. Nobody wants to see that. Promote Choice and access to actual advice, not a regime that favours single products over actual financial advice.
Well said.
Also ‘hypocrisy’ and ‘irony’ are very excellent words that capture the current state of affairs.
Spot on. Of course industry funds are going to protect their FUM. Boy what an opportunity handed on a plate to them.
I work for an industry fund (don’t shoot me I’m just trying to feed my family) and I can 100% confirm that this is true – we are the next royal commission!
Wonder if they’ll trot out that brown pegboard background again.
And I worked for the Hayne royal commission (also don’t shoot me, I was just scraping a living too) and I can also confirm that the whole show was a ruse to protect and grow industry funds and paint the banks and advisers and the bad guys. LOL
Industry Super the biggest whinges ever of Advisers receiving commissions.
– Yet the same Industry Funds now are the biggest receivers of HIDDEN COMMISSIONS charged to every member when 90%+ of members get No Service for this Hidden Commission.
– Vertically integrated tied agent back packers in calls centres that are uneducated, unqualified, unlicensed and unregulated give Advice / Sales.
– Vertically owned funds management peddling only a single in house investment set of products to 99% of members.
– Unlisted Assets that make up 40% of portfolios with valuations that are controlled by the same vertically owned Industry Super Funds. Wink wink, tell us what value / return you want.
– Balanced Funds that are up to 94% Growth Assets and APRAs heat maps have proved this fraud. Yet APRA and ASIC of course did nothing about it.
– Administration back end businesses that provide services to Industry Super that are owned by the trustees and union bosses to clip the tickets more $$$$.
– Life Insurances for Industry Funds with massive undisclosed Commissions / kickbacks to the ISA house.
But hey Nothing to see here folks move right along.
ISA are a Govt protected river of gold and if your nose is not already in the trough then bugger off, ISA’s crew are busy stuffing themselves to the gills $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
The modern days they don’t need Union Thugs, they now have ISA and wear spiffy suits but continue to smile at the masses as they help themselves to your $$$$$ and tell you the masses how wonderful they help all.
Oh it’s good to be ISA