The $60 billion industry superannuation fund AustralianSuper produced about 10,000 statements of advice in 2012. The fund’s head of policy and public affairs, Louise du Pre-Alba, says it expects to produce about 20,000 SoAs this year.
Think about this. AustralianSuper alone has about two million members. What if this super fund puts its arms around two million people, gets advice to them (ranging from subsidised intra-fund advice right through to member-pays, fee-based holistic advice), does it relatively cheaply and efficiently, and establishes a strong advice relationship with them quite early on in their financial lifecycles?
If it could do this, AustralianSuper could effectively remove two million Australians from the pool of clients for other financial planners to compete for.
And what if the other big industry funds did the same thing?
Well guess what? That’s exactly what they are doing.
If you think that industry superannuation funds are not serious about financial planning then it’s way past time to think again. That boat has sailed.
And if you still think industry funds are anti-planner then, with the greatest of respect, you’re mad.
Compare the pair
The industry funds’ “compare the pair” advertising was always clear: they are not and never were anti-planner; they were purely and simply anti-commission. Those are two very different things. Their message was: don’t go for a fund that pays commission to financial planners.
It was never a message against seeking advice. But sections of the financial planning industry chose to interpret the advertising as a direct attack – which it never was. And by misinterpreting the message, they misunderstood the funds’ intentions.
Don’t worry about professionalism in industry fund land. On Monday this week there were about two hundred financial planners in a function room at the Melbourne Cricket Ground, all of them from not-for-profit super funds (read: industry funds), and the representation of CFPs in the room was at least as high as it is at most financial planning gatherings (except perhaps an FPA-only event).
The organiser of the Financial Advice In Super Symposium, Industry Fund Services, put together a strong program. As well as speakers from key industry funds – including AustralianSuper, UniSuper (480,000 members) and SunSuper (more than one million members) – the program included the chief executive of the FPA, Mark Rantall; the chair of consumer group Choice, Jenni Mack; ASIC Commissioner Peter Kell; Parliamentary Secretary to the Treasurer Bernie Ripoll; the Coalition Member for Bradfield, Paul Fletcher; the managing director of Strategic Consulting and Training, Jim Stackpool; and Mercer’s financial advice leader Jo-Anne Bloch.
That’s a line-up that would more often be found at a financial planning “industry” event; the fact that the ISN symposium spent so much of its time examining the transition to professionalism and the need for strong ethical and technical skills among financial planning practitioners should leave no one in doubt that the standard of planner in the industry fund space is probably better than average.
The enemy within
But another notable aspect of the event was the new-found respect that exists between Industry Super Network, led by David Whiteley, and the FPA.
Probably only a year ago, these organisations were more or less at each other’s throats – mortal enemies, essentially. But if the representation of CFPs in the room is any guide, then industry funds are actively pushing that professional designation, which obviously translates into membership of the FPA.
Rantall reiterated the FPA’s stance that it is employer-agnostic. If you’re a financial planner, and if you measure up, then you’re a potential FPA member, irrespective of where you work. Professionalism, after all, exists at an individual, not institutional, level.
Rantall was asked when there would be an industry fund financial planner on the FPA board. His answer was simple: as soon as such a planner nominates, and is elected. Expect that to happen sooner rather than later.
Industry funds have embraced financial planning in breathtaking fashion. They are pushing hard to make their financial planners measure up on technical competence and ethics – professionalism in other words – and they are developing innovative and compelling planning solutions for massive groups of people.
Industry funds are not the “enemy” because they’re anti-planner. If they’re the “enemy” at all, it’s for exactly the opposite reason.
More options are always better! I’m hoping increased compeitition benefits consumers. Aren’t we moving in the right direction?
What I don’t understand is that if industry funds are not anti-planner (with the exception of their in-house planners) and are confident in their expertise, low cost etc etc why do they restrict payments for fees to just their in-house planners? If they were open, transparent and provided the same services to all licensed planners, other ‘non in-house planners’ may actually use them. After all, all planners want is to be able to be paid for their services in the most efficient manner with the client’s approval. And if their fund was the best way to achieve this for clients and the planner got paid for their services to the client, it would be a good result for all.
Nothing like a lively discussion about something we are passionate about – which is always placing the clients interests first with advice focused on improving their financial situation and not selling products
This is a well presented perspective of the development of planning within industry funds. When it is broadened out further the challenges start to emerge and it is this that the ISN will be challenged with. Advice as a stand alone profession without cross subsidy is difficult and means a different playing field for employee based professionals versus self employed professionals. The employee based professionals can and often do undertake an excellent job but are always there for a secondary reason. This is indisputable and leads to conflict which needs to be managed. In the private sector it is for cross sell and profit and in the not for profit sector it’s for member retention and Fund growth – this point is indisputable. Both Private and Not for Profit are experiencing a client base that is moving away from their traditional service offerings and becoming more self directed and involved – this is the SMSF sector made up of the same members. As a rule of thumb many not for profit funds want to retain the members, not for the benefit of the member and their needs, but for the benefits of scale in the fund – Ipso facto the challenge of what’s best emerges. Equally when recommending full advice it’s a challenge to imagine “one fund recommending another” – despite possible lower cost, better return history and more capable servicing. We would do well to accept that its not a perfect world and Fiduciary can’t exist in employee models – but unless I am mistaken, it was the ISN network that criticised the planning industry and pressurised the Government to legislate for asked for Fiduciary …. before realising it makes better sense for them to have “best interest”. But we aren’t likely to see one Fund recommend another for some time to come irrespective of client best interest. Equally, smsf growth is hurting fund membership but may be beneficial – but seems to be disliked by the ISN with blame being put on accountants and planners for its growth. We have some way to go to healing the past wounds and criticism but time and professionalism will be an ally.
The three previous comments show a distinct lack of understanding of industry funds and reinforce the self serving nature of much financial planning. A fund is not a “product”, it is an avenue to retirement for members, where excellent research and portfolio construction ensures members have the oportunity to enjoy the best retirement they can. It is interesting to read “Case studies” from financial planners, especially involving members of industry funds. The first step is take the money away from the fund and then the FP attempts to construct a portfolio from “recommended” lists. A good industry fund has far more resources than any FP or FP team in the country skilled in portfolio construction. They have access to a far wider range of investments and have far more expertise in assembling the assets into portfolios to meet the member needs.
Why do FPs continue to focus on “product” and “product providers” when discussing industry funds. These terms are applicable to for profit retail product providers, where the main reason they own FPs is to distribute product. That is not a State secret. Industry funds do not distribute “product”, they are not “product providers”, their reason for existance is to provide members with the best retirement they can have.
Get over it, industry funds have outperformed other “products” for years. The only reason FPs construct portfolios from “recommended” lists of fund managers is that it is impossible to make comparisons and see what value the FP has added (or not?). They have used SMSFs to take this to a whole new level.
I think the scope of commentary narrowed with Fred’s ( no name no industry ) focus on attacking the planning industry again…….. Exactly what’s not required. Perhaps a couple of examples of why its not a perfect world or an easy solution would help.
(1) Consider the plight of an MTAA financial planner….not able to recommend any other “scheme” ( not product ) – would it have been in any member’s best interest to use a planner in the MTAA having regard for its governance history and public failure? what would the planner have recommended a few years ago….the MTAA Fund…the employer? …perhaps an alternate industry fund …..? this illustrates succinctly the conflict of employee based in house planners but it doesn’t mean get rid of them and it doesn’t blame them. It means we need to stop fighting and criticising and discuss openly how to improve and simplify the complexity of self interest.
(2) Consider Fred’s implied comments that all planners dislike Industry Funds and wont use them. ( dated perception )….. And yet as we speak the Unions are recommending that ‘their members’ ….DO NOT USE THE C-BUS FUND . What does a planner make of that suggestion? and what does an employee based planner in ISN/Equivalent do when an existing member asks for guidance?
As I said originally, the article written by the editor is excellent. Some shared and considered views by readers will only help open out the route to overcome the hurdles. Fred….. I am an RM of an independently owned and managed AFSL that doesn’t “restrict any Industry Fund” other than using common sense around size, investment programme and expertise and governance. There are a few funds that don’t make the grade compared to alternative better and more secure offerings. Please Consider.
Thanks Fred53, I needed a good belly laugh! Your distinct lack of understanding of financial planning is very obvious! LOL!
It is wonderful to see so much advice being provided to industry fund members, so long as the advice is in the best interest of the
client and is not restricted to the industry fund product range (I.e. just a retention tool for the fund(s)).
As a planner I welcome the day I can work with industry
funds and recommend their products with confidence alongside the wholesale products I use. I just need access to information (transparency) and confidence in the product, and that there is a process for client compensation if something goes wrong within the fund. I would welcome the Industry Fund products being available in the retail world and competing directly with retail offerings.
I do, however, think that a planner who is employed by a product
provider and has an approved list that is restricted to one product will struggle to always act in the best interest of the client. How is it possible to do so?
As for the FPA. If CFP designation was portable between associations I would suggest that the FPA would have ceased to exist by now. They have done such a poor job of representing their membership in the FoFA and MySuper debates. I would personally not remain a member if I were not a CFP and wanted to retain the designation. I guess they need to be looking around for new potential members to avoid collapse. If the Industry Fund advisers can honestly abide by the FPA code of conduct then they should be welcomed with open arms!
Great point B.Real. How can a planner who is employed by a product provider, restricted to one product exercise a fiduciary duty and act in the best interests of the client?
However B.Real, I must disagree with you on one point. The FPA has done a magnificent job of protecting the majority of it’s membership base: product providers. They can retain their FUM by pulling the strings behind puppet advisers and somehow this still fits within the code of ethics? I don’t know how they’ve done it but you’ve got to tip your hat to them…even though it doesn’t put the client first, but that never seems to have been the priority on the agenda.
I mean how on Earth can AMP be pulled in front of ASIC twice since 2006, in December last year for the training process they’ve been using at their “academy” and back in 2006 for the switching (read no reasonable basis) enforcement, and still be allowed to hold membership with the FPA. I’m not even a member of the FPA and it infuriates me. If the FPA showed any leadership and said to AMP “go away, you’re not welcome here anymore” I’d probably join back up…actually I definitely would join back up. But, unfortunately I’m in the 20% of advisers who aren’t aligned to a fund manager, so I’m not a priority. One day we will be, B.Real.
One more thing…
B.Real, what value has CFP added to your career? How many of your clients have been referred to you because you’re a CFP and how many have been referred because you’re good at what you do? Do you really need it?
… ‘I’m not a member of the FPA’. I’m not surprised. If you were, you would not make so many erroneous claims about the largest adviser association in the country.
I am a CFP member and a board member of the FPA, so I’ll remind you Matthew:
*the FPA does not have corporate members nor product providers as members. All members are qualifying individuals. Voting members are all individual advisers. You may see many of them as puppets but I can assure you they are intelligent people with their own informed opinions. Many of them are intelligent and diligent enough to have achieved the CFP qualification.
*to further clarify the above point, the AMP therefore is not a member of the FPA, it has no voting rights and no board representation. The FPA, in effect , did say ‘go away’ to the AMPs of the world in April 2011, when over 94% of our members voted in favour of constitutional change.
*the FPA is on record as being both employer and license agnostic. This means that we recognise that their is no one ‘right’ business model to serve the advice needs of all Australians.
*individual practitioners are subject to our Code of practice. If consumers or other members feel that a member is in breach of this code, they can report the adviser to our Code of Conduct committee which has an independent non-adviser chair.
It’s very unedifying when anyone feels that the only way they have to advance their position is to drag down others. Their are many ways, many business models in which an adviser can advance our profession and their career without compromising either their ethical or legal obligations.
Patrick can you confirm or deny that you’re the CEO of IPAC, right?
And AMP owns IPAC right?
And you’re on the board of the FPA. Have I got my facts right here?
It seems we have a different view of what a profession looks like. Consumers have had a gut full of seeking advice and being flogged products. The easiest and quickest and most logical way to achieve this is to say to financial advisers “you can’t work for a licence owned by a product provider”. But that would upset the business plan of many people.
The link between advice and product is dragging us down. By us I mean advisers who have no alignment to a product provider. No potential conflicts of interest lagging in the background.
I bow to the strength of people like Shane Nicholas and Jason Bragger who are members of the FPA and are making positive changes within. I simply don’t have the patience.
I’m not trying to drag other people down to advance my position. I just don’t think product providers and anyone who isn’t able to separate their interests from product providers belong in the advice profession.
Matthew,
No, you haven’t quite got your facts right. I know you’ll agree how important it is not to be misrepresented. Anyone who is interested can find my FSG on our website, this fully discloses all my commercial and licensing arrangements.
I was elected to the FPA board by a popular vote of planner members, and I am proud to be part of this association which acknowledges that just because different planners have different approaches and different business models doesn’t mean they can’t be professional or act ethically in advising their clients. In fact, members of the FPA, through their membership and or Code of Conduct, voluntarily subject themselves to peer review of their advice.
We should celebrate that the ISN is embracing financial advice as they are the point of financial advice contact for many Australians. This will mean thousands of people are better off, and the FPA is happy to help the ISN and their advisers (and of course, all our members) raise the bar in terms of their professional practices and quality of advice. It would be a mistake to judge all of their advisers as inferior, or call them puppets, simply because their business model is not congruent with your interpretation of professionalism.
I’m very sorry if I got some facts wrong Patrick, but I still can’t figure out which ones.
Your LinkedIn profile says you’re the CEO of IPAC, the IPAC website states that “It is also a wholly owned subsidiary of the AMP group and you said above that you’re on the board of the FPA. I agree it’s important not to be misrepresented – so what did I get wrong?
Whilst I have your attention – I just noticed something a bit strange. There doesn’t seem to be any information about who is on the board of the FPA on the website. Am I right or wrong? I can’t find it anywhere. In the interests of transparency I thought it would be important. I’ve probably got this fact wrong…have I?
I believe that we need to break the link between advice and product. I’m sure I’m not the only financial adviser that believes this.
I’m flattered by the attention Matthew but I doubt any other readers care as much. Please read my my LinkedIn profile more carefully – I am the CEO of ipac Western Australia, not ipac. Again, while you are on the web checking me out, read my FSG as this puts it completely crystal clear.
Details of the directors of the FPA can be found by downloading the annual report from the website. It’s actually in the members section though – but given the FPA no longer has institutional membership perhaps, given your first comment, you’ll consider re-applying for membership?
I welcome your view that the link between advice and product needs to be broken, it has some compelling aspects in its favourt. I just don’t see the need to denigrate others who disagree with you, nor inaccurately disparage associations that I am not a member of.
Fair call Patrick, will pull my head in a bit. If I could turn back time I’d retract the ‘puppet’ statement.