Where will you be getting advice in the future?

Where will you be getting advice in the future?

Alex Burke

Speaking at a major superannuation industry conference, the CEO of Industry Fund Services, Cath Bowtell, told the audience the way we get advice needs to be reassessed.

Specifically, she called for an expansion of the definition of intra-fund advice in super. What’s that? It’s currently defined as “types of advice that a superannuation trustee can provide to members where the cost of the advice is borne by all members of the fund.”

Those types include the extent of cover provided by insurance arrangements “that apply to the member’s best interest in the fund” and what cover might work for them, increasing contributions (and the impact thereof) and switching between a fund’s investment options.

There are other potential types of intra-fund advice for which a fund and collectively charge members, but in all cases it needs to be “simple, non-ongoing personal advice.”

It can be difficult to extend this kind of advice into something more specific to a person’s circumstances because, for example, the second a spouse’s financial position came into consideration, intra-fund advisers were suddenly subject to the “full regulatory regime.”

The problem with limitations

As Bowtell identified, the scope of advice super funds are permitted to provide (on a collectively-charged basis) is limited. While a recent Productivity Commission report advocated for the provision of intra-fund advice – especially given that comprehensive advice may be unaffordable for some super members – it also suggested that “all advice in relation to super is arguably personal.”

The question, then, is where does one draw the line?

The Royal Commission

Some commentators and stakeholders feared that the Royal Commission would recommend an outright and unequivocal ban on vertical integration.

While this wasn’t borne out by the final report, it’s still fair to say that the relationship between the manufacturing of financial products and the distribution (i.e., advice and information on them) has been challenged on multiple fronts.

With an upcoming election, we still don’t know how (and when) all recommendations will be acted upon, but given the structural nature of intra-fund advice – at least as it exists under the current legal definition – it’s clear why this consortium of super fund groups might want to revisit the topic.

Wrapping it up

Bowtell suggested it was a good time for super funds to revisit the definitions of intra-fund advice given the increased level of policy activity in financial services. But it remains to be seen how advisers and super funds will work together in the future, and how you’ll be able to get advice from your super fund when you really need it.

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