Clockwise from top left Nicola Beswick, Michael Winchester, Rachna Chandna, Tony Bongiorno, Natalia Smith and Warwick Gribble

Previously a source of friction for financial advisers, industry or profit-for-member funds are moving to cater to advisers and their clients, say senior planners.

Financial adviser Tony Bongiorno, a 53-year industry veteran, said adviser relationships with profit-for-members funds had changed enormously in the past eight to 10 years.

Not until the mid-2010s, many decades into his career, did the Bongiorno Group informally start working with profit-for-members funds. It happened after speaking with potential new clients at a talk for final-year medical students at a university where he encountered and resonated with Aware Super representatives.

“Initially the industry supers, if you’d like to call them, didn’t like our particular neck of the woods and we probably viewed them with some suspicion but the world’s changed,’’ Bongiorno told Professional Planner’s digital roundtable.

“Everything’s changed. We’ve all morphed and we’ve all matured and we’ve learned to live with each other, and more importantly, embrace each other. I can’t tell you how good our relationship with Aware Super is, culturally we sit very well with them… we’re very much in tune with Michael’s [Winchester, Aware Super’s head of investment strategy] investment philosophy [and] in tune with the people that we deal with there.

No longer a source of friction

Your Lifestyle CEO and senior financial adviser Gareth Hall said his company had 43 corporate clients that paid his firm a fee for service to assist them with their employees’ super.

“It’s not that long ago that the industry super funds as a group were really anti-advisers, they had those ads that even went as far as [depicting advisers] stealing money out of a client’s pocket, and things like that, which was really distasteful,” Hall said.

“I think there has been a great coming together, of the way they operate and from my perspective now, I see industry super funds doing things which retail funds are not capable of doing.”

Hall said industry funds were not for everybody because some people wanted “more bells and whistles” and exotic asset choices.

“But for the vast majority of people, I do think that it gives them a better experience and it gives them less volatility, just because of the nature of the investments,” Hall said.

Hall said the Hayne Royal Commission heralded a catalyst for change for employer clients to shift to industry funds after retail funds and banks were shown to be doing the wrong thing, changing the momentum for employer clients to shift to industry funds.

The performance test, where BT and CFS failed the first year, had put profit for member funds in a stronger position, he said.

Employer clients open to industry funds

Red Lion Wealth Advisory senior financial adviser Phillip Monaghan said employer clients have shifted their view on industry funds.

“A lot of it comes down to performance in the support and that’s where, and I’m biased because I’ve worked at a not-for-profit fund, but I think that’s coming into play and even employers are getting more open to it,’’ Monaghan said.

“They used to say all their funds are run by the union or…  just whoever they want to put on the board, but they’re taking a whole lot more open view to how they [industry funds] operate and the value of them.”

Emerald Private Wealth director Rachna Chanda told the roundtable that an apparent “warfare” between advisers and industry funds was not being helped by making it hard for advisers to charge a service fee.

Fees might be better paid on cash flow or from the product, for tax effectiveness, she added.

“So, if these profit-for-member funds are going to be competitive, they need to allow for the B2B market,’’ she said.

Your Lifestyle’s Hall said there was still an underlying belief from some in the industry that advisers were “going for the back pocket of the client rather than being appropriate in what they’re actually charging”.

“I hope I’m wrong with that, but that is sort of the perception,’’ he said.

FMD Financial senior adviser Nicola Beswick said the amount of documentation and compliance needed for the structure of adviser fees should discharge any perception around motivations. there appeared to be more “distrust” from profit-for-member funds in the structure of adviser fees charged.

“When you drill down to the amount of documentation, then that extra step of compliance, and all the other things that we have to do as advisers, just seems a lot more onerous to prove that you were actually doing the right thing and having that little bit of almost just a little bit of distrust,’’ Beswick said.

“In reality we’re all in the profession for the same reason and that’s to help the clients achieve a better outcome, regardless of where they’re at, and we should be more united in that approach and trying to streamline those things.”

Barriers to easy engagement

Wealth Co Advisory principal Slade Burnet said lack of information, structure or will on fees and transactions was a barrier for advisers to using these funds as a super option for clients.

“It’s not just the people with $50,000 or $100,000. I’ve got clients and industry partners with $2 million and $3 million so it’s a proposition for every Australian,’’ Burnet said.

“It’s very difficult to implement the advice and investment strategies you want to do for a client with a lot of the non-profits.

“I can’t go in and transact for the client to the extent and I can’t necessarily get the information I need to understand the client and that’s the thing I think that stops a lot of advisers, probably engaging more.”

He said in some cases retail funds were more efficient, providing better transactional capability on their platforms.

“I’m a lot less efficient, dealing with a client. With a retail fund, I can implement the strategy, I can do the investments, I can make it a lot easier for the client to execute – I can’t do that with a lot of other not-for profits but I do know they’re looking to improve their infrastructure to allow us to do that,” Burnet said.

JSA Group financial adviser Andrew Shakespeare said Aware Super, Australian Super and Australian Retirement Trust were the best industry funds with ambitions to work with advisers, even though one took up to seven years to provide an adviser portal.

“It’s not just fees, it’s having that adviser portal, it’s having the adviser service team even not just going through the normal call centre to upload things or to get support,’’ Shakespeare said.

“It’s all these other items. You have a BDM relationship directly and that makes a for both parties to save them time and money and but also us to have a greater or better interaction for us and our clients as well.”

Accessibility and technology as important as investment

TRU Wealth Advice director and principal financial adviser Natalia Smith said accessibility and technology was as important as investment outcomes for her clients.

“We are fully independent,’’ Smith said. “We are there providing product advice and services.

“When we look at a product, it has to fit all the bills, it has to cover everything. It’s not just about investments, it’s also about infrastructure in terms of how the technology works for a client, whether they’re able to log in and actually view their portfolio line. For us the technology piece is really important and also for a lot of our clients.

“Hopefully in the future, [industry funds] will invest more money in technology, they’ll invest more money in those relationships, and we will see more and more uptake.”

Aware Super national manager for advice relationships Warwick Gribble said the industry fund launched its first-generation portal in July 2021 with a move to second generation and transaction capabilities scheduled for next year.

He added he understands advisers are also the fund’s clients.

“This is an evolution for us,” he said. “It’s not something that can be done day one, it is something that it’s important that we continue to show progress and support and growth over time and hoping obviously to grow with yourselves as well.”

He said Aware Super had focused on having registered advisers and members accounts as well as increasing visibility of investments to members and advisers’ clients.

The fund was also “very mindful” advisers had to be paid an appropriate fee and the fund needed to offer a range of supports for advisers, including education pieces.

“One of the things we built very quickly when I first arrived was a BDM team that actually could support his advisers in their practice,” Gribble said.

“We actually have great education we provide to the members, and I think it’s something that we can look to do going forward in some ways as well, where it’s about raising the financial literacy of people overall.”

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