The Cooper review of the superannuation system yesterday officially released its MySuper proposal for a simple, low-cost superannuation product designed to “[re-focus] on the principle that occupational/compulsory superannuation should work well for those members who elect not to exercise choice,or have chosen the trustee default option”.
By design, a MySuper product – which can, incidentally, be offered by any superannuation provider in the country, provided it complies with the proposed rules – aims to make sure members of such funds do not “inadvertently pay for services they either do not want or do not know about”.
Included on that list is financial advice. There is no “cost of advice” included in the MySuper cost structure. It is a product designed to
exist and be used without advice. Any member may obtain advice, of course, and the cost of that advice can be paid from the member’s MySuper account, but the member must explicitly opt in.
The Cooper review’s MySuper proposal has a little bit to say directly about where advice fits into the structure
For example, at Section 4.2.7 it says:
No bundled advice
(except for intra-fund advice) could not be bundled with MySuper products and it would be up to members to request advice. Members who want advice must have access to:
(i) free, quality information on the fund’s website; and
(ii) intra-fund advice about MySuper along the lines of ASIC RG 200: “Advice to super fund members”, the cost of which can either be shared across the MySuper membership (like an administration expense) or charged to those who use the service.
No trailing commission or ongoing payments
Fees for personal financial advice sought by MySuper members outside the intra-fund model would be on a fee-for-service basis negotiated between the member and the adviser and could not involve any trailing commission (or other similar payment or a volume rebate paid by or behalf of the trustee). If the trustee allows, fees for advice about superannuation would be able to be paid from the member’s account.
Trustees could have an arrangement with advisers to provide the service to MySuper members. However, every arrangement for payment for advice would require express renewal by the MySuper member every 12 months (that is an opt-in regime for advice where members are in control).
Given that members of the Investment and Financial Services Association (IFSA) have undertaken to phase out commissions on superannuation products, and market forces have already led to significant cost reductions, is the MySuper proposal necessary?
Will it provide a genuine low-cost alternative for Australian workers?
Will it undermine the industry funds’ contention that they are the only funds that should be considered as default funds under industrial awards?
Is the MySuper proposal good, bad or a non-event?