Garry Weaven

Superannuation funds need to be bolder about giving financial advice but have instead found themselves in “fear” of forces against the super industry according to the founder of IFM investors and former ACTU assistant secretary Garry Weaven.

Appearing on Investment Magazine’s ‘Future of Super’ podcast, Weaven said there is a huge area of need around the way super interacts with the pension and taxation system.

“There is an enormous area where funds should be doing more and one of the reasons they’re not doing enough is because of fear,” he said. “Fear of the regulator is sometimes manipulated by forces averse to the super funds themselves.”

Scrutiny on industry super funds has typically come from the right side of the isle, but even Labor’s shadow superannuation minister Stephen Jones said he wasn’t comfortable with any model that resembles vertical integration in intrafund advice.

Weaven said key politicians “feed the press” with advanced warnings of notices and questions they will inquire.

“That influences the regulators in terms of their engagement with the funds and the funds react with overcaution. Who can blame them?”

He said more trust must be created in the political and regulatory environment.

“[Super funds] become so cautious they have one eye on a government or opposition that might be trying to find ways destroy them or publicly embarrass them. Funds need to be bolder. If they’re properly based ethically, there’s a lot of advice they can give without needing to fear transgression of regulations.”

Weaven said the Retirement Income Covenant “almost mandates” the funds have to give advice.

“That’s an opening that should be exploited.”

Broadening the scope

The Quality of Advice Review will identify the practicality of intrafund advice in the current regulation and how it might affect competition in the retail financial advice market, opening the door to its expansion.

Of the four questions for consultation on intrafund advice, none ask whether there are potential conflicts to extending it’s application.

“Intrafund advice is not a term defined in legislation but is generally used to refer to the types of advice that a superannuation trustee can provide to members without an additional fee being charged to the individual member,” the advice review issues paper stated. “Intrafund advice is often personal advice because of the permitted topics. It is always limited in scope.”