Superannuation advice first on the agenda

The Financial Services Working Group (FSWG) has put forward three proposals for improving access to simple superannuation advice in its first consultation paper since the group’s inception in February this year.

The paper ‘Simple advice on choices within an existing superannuation account’ seeks input from the industry and consumers on the regulatory and other steps that could be taken to improve Australians’ access to low-cost financial advice within their superannuation fund.

The advice would seek to answer member queries on issues such as investment choice, insurance, contribution types, nominating beneficiaries and retirement income projections.

The Financial Planning Association of Australia (FPA) welcomed the effort to make advice more cost-effective.

“Australians need financial advice more than ever, but red tape and lengthy disclosures have been strangling financial planners and making advice expensive and therefore less accessible to consumers,” says Jo-Anne Bloch, chief executive officer of the FPA.

“The review will make access to advice easier and less expensive for the seven out of ten Australians who currently don’t seek advice. Many super fund members, for example, have straightforward questions and the regime in place at the moment makes it prohibitively expensive for them to get advice.”

Options for change outlined in the consultation paper include clarification of how the law applies to simple advice; placing the legal responsibility for the quality of the advice with the person providing the advice; and removing the requirement to provide a Financial Services Guide (FSG) where the advice is provided by the superannuation fund.

Under the second proposal, the working group suggests the law could allow a licensee to take responsibility for the provision of advice where it is provided under the direct supervision of the licensee.

“No disclosure would be required about the individual adviser (for example, adviser or call centre operator) provided there were no relevant conflicts of interest to disclose,” the paper notes.

Stipulations on the third proposal include: that the super fund is only exempt from the disclosure requirements if it does not receive any additional remuneration as a result of providing the advice; and that there is no material conflict of interest.

The working group is a joint initiative of Treasury, the Department of Finance and Deregulation and the Australian Securities and Investments Commission (ASIC) dedicated to examining key issues associated with financial services advice and disclosure.

Minister for Superannuation and Corporate Law, Senator Nick Sherry, says the Government will pave the way for millions of Australians to access simple advice about their super.

“Superannuation is compulsory, it is the largest area of unmet need for financial advice, and there are many unsophisticated investors,” he says.

“Access to basic advice is critical when people need help making retirement savings choices.” Industry Super Network commended the decision to leave fund consolidation and switching outside the scope of the consultation paper.

“The disaggregation of advice from product sales is important in maintaining consumer protection,” says David Whiteley, Industry Super Network executive manager.

“With-in super advice structured appropriately can avoid the conflicts of interest currently plaguing the commission-based financial advice industry.”

Whiteley says superannuation should be distinguished from other financial products because of its compulsory nature.

“Many members need straightforward advice on specific issues, but funds have been hamstrung in their capacity to provide this advice,” he says.

“This consultation paper foreshadows a wise middle path between providing affordable advice about super without reducing consumer protection.”

Industry Super Network project manager Robbie Campo says few people need full holistic advice on an ongoing basis, unless they are approaching retirement.

At the Conference of Major Superannuation Funds in Brisbane in March, she said super funds should be given relief from Financial Services Reform (FSR) when giving limited advice on products already held by members.

“Where there are conflicts of interest or conflicted remuneration there is little that can be done to simplify advice without lowering consumer protection,” she said.

“The real opportunity lies in simplifying advice for members of super funds during the accumulation phase.”