A recent speech by David Whiteley, executive manager of of the Industry Super Network (ISN), to the Association of Superannuation Funds of Australia (ASFA) has put another cat amongst the pigeons in the ongoing debate around sales commissions and superannuation advice.
In his paper, Whiteley invoked the sole-purpose test in relation to the use of superannuation money – sourced from fund members’ accounts – to pay upfront and/or ongoing commissions to advisers for financial advice.
This advice often spans a range of issues and products, clearly outside the super envelope. The irony of Whitley’s insight is that it was prompted by the print media ads produced by the Financial Planning Association (FPA), which boasted of offering a wide-ranging advisory service, without ever considering the issue of whether or not it was legal, let alone appropriate, to use superannuation money to fund such activities.
Accountants, financial planners and other advisory groups, as well as the commercial superannuation product providers who rely upon them, may well argue that Whiteley is simply acting in the interests of his constituency – industry super funds – in raising this new issue. Perhaps. But who will treat such arguments seriously in the current environment?
Recently, Ric Battelino, deputy governor of the Reserve Bank of Australia told the funds management industry that underperformance of retail super funds and the prevalence of commission-based advice are a matter of public policy focus. And the immediate past chairman of ASIC has exhorted financial planners to act in the best interests of their clients – which would involve a radical overhaul of most approved product lists.
Garry Weaven is Chair of Industry Funds Management, an investment service provider to the superannuation industry, a director of Members Equity Bank, which is owned by 40 superannuation funds, and a director of Pacific Hydro.