CSSA urges government to adopt solution for remuneration dilemma

The Corporate Super Specialist Alliance (CSSA) is urging the Government to consider a solution suggested by the Commonwealth Bank of Australia (CBA) and AMP and an alternative solution put forward by Minter Ellison, that would allow corporate super specialists to continue to offer their services.

CSSA president, Douglas Latto, highlighted a report from a Parliamentary Joint Committee hearing in February 2012 which stated, “… corporate super specialists promote choices in the market and these valuable services should continue to be provided. The Committee believes that corporate super specialists should continue to receive benefits where they receive fee for service or a value of scale efficiencies.”

Mr Latto said, “Currently, if corporate super specialists complete a tender or product selection, they will not be able to receive remuneration for the work they do because it will be considered conflicted. While the Committee recognized this problem and is supportive of the concept that corporate super advisers need to be remunerated for the services they offer, no solution has yet been put forward.”

The solution put forward by CBA and AMP suggested that making an employer a wholesale client rather than a retail client would remove the conflict. “Not being a retail client means the service provided would not be conflicted,” Mr Latto said.  “Corporate super specialists would not be providing personal advice and therefore the conflict is removed.”

An alternative solution put forward by Minter Ellison in their public submission suggests making intra-fund advice exempt from conflicted remuneration. “It is not exempt at the moment, but making it exempt would also solve the problem,” Mr Latto said.

Of the two options, Mr Latto said making the employer a wholesale client would also offer the best outcome for employees. “Current legislation means corporate super specialists have to act in the best interests of the employer when helping them select default funds for their employees. We believe when they prepare tenders, corporate super specialists should be acting in the best interests of the employees,” he said.

Mr Latto said the solution proposed by CBA and AMP means the best interests duty to the client (the employer) is removed and corporate super specialists can act in the best interests of employees. “However, if intra fund advice is made exempt from conflicted remuneration, corporate super specialists are still preparing a Statement of Advice for employers and still have to act in the best interests of the employer,” he said.

Mr Latto said a timely solution is necessary because with modern award reviews occurring on default super, there are potentially thousands of employers wanting and needing help selecting a new fund.

“If legislation proposed by the Coalition is approved, there may be a lot of funds under multiple awards that could consolidate into one MySuper fund,” he said. “This is because the Coalition, we think, may allow any MySuper fund to be a default fund.”

Mr Latto said there is always going to be fund selection activity in the market. “There will be different levels of activity and corporate super specialists, historically, have been the people to turn to for help in this area,” he said. “We need to solve the remuneration problem quickly otherwise corporate super specialists will not be able to continue to provide this much needed service.”