The Retirement Income Covenant will make no directive over the usage of intrafund advice, with the topic scheduled to be covered in the Quality of Advice review instead.
While the Quality of Advice review will examine the regulatory framework for financial advice and how it interacts with the RIC, the senate, in a report acknowledging submissions to the consultation on the RIC last week, said it was fine with how the covenant would interact with advice.
“The committee is confident that trustees can fulfil the requirements of the covenant and create effective retirement income strategies without providing financial advice or breaching anti-hawking laws,” Economics Legislative Committee chair, Paul Scarr, said in the report.
At odds with the industry
The report noted many submissions to the consultation raised the potential conflicts of interest arising from superannuation funds providing financial advice.
It came as shadow financial services and superannuation minister, Stephen Jones, previously said he was concerned about the potential for the intrafund advice model to have any resemblance to the vertically integrated models the advice industry is working to distance itself from.
In its submission, the Australian Institute of Superannuation Trustees said ASIC needed to provide clarity for trustees so they could better understand the role of advice in retirement income strategies.
“ASIC should update their guidance about the boundaries between the provision of factual information and general advice, including in relation to the Retirement Income Covenant, and the Explanatory Memorandum foreshadows this,” the AIST stated.
Construction industry fund Cbus said it was “unrealistic” to expect a super fund to deliver comprehensive financial advice to each member efficiently or cost effectively.
“The ability to provide intrafund advice is vital in providing cost efficient, limited advice to more members about their retirement at scale,” Cbus said in its submission.
“Given the compulsory nature of superannuation, and the cost of holistic personal advice, intra-fund advice provides significant benefit to members who otherwise would not get advice.”
However, Super Consumers Australia said “there is an inherent conflict in allowing funds to provide guidance on their own products”.
“By way of a simple example, a fund in which the average member has a very low retirement balance may justify only providing an account-based pension in the retirement phase on the grounds that this is the best solution for its members,” SCA said in its submission.
“This fund has no incentive to inform its customers about other types of products that may help them achieve their retirement goals. This would be a disservice to members in cohorts which the fund has decided aren’t significant enough to develop specific strategies,” SCA added.
“Without independent guidance these groups of consumers may not look beyond the products their fund has on offer, which may be totally inappropriate for their needs.”
SCA had used its submission on the RIC to call for the Quality of Advice review to cover retirement income products.
