Industry, not ASIC, should set standard for 99FA

Leaders representing the retail and profit-to-member fund sectors agree that it is best for the industry to get ahead of regulatory guidance in setting a standard for approaching oversight of advice fee deductions, the Professional Planner Licensee Summit heard.

The application of section 99FA of the Superannuation Industry (Supervision) Act has dominated discourse during debate on the Delivering Better Financial Outcomes legislation, which would codify previous regulatory guidance.

However, much of the advice industry has argued the guidance provided to date is still vague and the legislation potentially places an unrealistic burden on funds to check all Statements of Advice, despite assurances from the government and the corporate regulator this won’t be the case.

AMP group executive for platforms Edwina Maloney told the summit there’s an opportunity to create an industry-led standard that sets out a framework to help meet these regulatory obligations.

“We should be taking the lead, whether it’s the FSC or ASFA,” Maloney said.

“ASIC should review it, but we as the industry know this best. Licensees are in the best place, they have been doing this for a long time to oversee advice documentation. We should be collaborating to set a standard we all agree on and then get ASIC’s support for that standard and roll it out. We need to do that fast or it will be taken out of our hands.”

Industry Fund Services executive manager for advice solutions Adrian Gervasoni agreed the industry had the opportunity to create a uniform process.

“We are willing – IFS, that is – to play some role here to get critical mass amongst the super funds and that’s important,” Gervasoni said.

“You’re not going to get everyone in one step but if you can get enough signing up initially there’s something to be done.”

Australian Retirement Trust executive general manager – advice, guidance and education Anne Fuchs said all the peak bodies – including the Financial Services Council, Financial Advice Association, Super Members Council and the Association of Superannuation Funds of Australia – should be on board for this.

“Let’s focus on the things we have in common,” Fuchs said, who is deputy chair of the SMC’s advice committee which is chaired by  UniSuper head of advice and education Andrew Gregory.

“Everyone agrees. We just need to get the right people around the table to do this for the good of the people of Australia.”

Maloney said there are trustees who will interpret the law at “very different ends of the spectrum”.

“That will hit you as licensees,” Maloney said. “You know this, this is why you’re frustrated, and I understand that because there will be massively different interpretations.”

The advice sector, along with retail platforms, have been critical of this part of the bill with new Insignia Financial CEO Scott Hartley joining the chorus of licensees and the FAAA in opposition to the bill.

The Federal Opposition has also written to the government requesting amendments to the bill in exchange for support.

The bill had been under review by the Senate Economics Legislation Committee which on Friday, after the summit concluded, recommended the bill be passed.

Full court press

Amid debate over the DBFO bill, SMC chief executive Misha Schubert drew the ire of the advice sector after commentary referring to “dodgy advisers”. Schubert’s comments first appeared on Tuesday night in article in The Australian, which referenced to an ASIC report in May warning about cold-calling operators influencing people to switch super accounts using high-pressure sales tactics, and calling for an end to a loophole in the anti-hawking law that didn’t cover “the sale of financial advice”.

While the SMC has maintained that the criticism was misguided and not meant to be attack on advice as a professional service, the coverage came at an inconvenient time as debate over the DBFO bill heated up. It fuelled the perception the super industry had lobbied the government to word the law to make it difficult for advisers to be able to be paid for advice through fees deducted from member accounts.

Schubert later apologised, and Fuchs subsequently issued a statement  re-iterating her and the ART’s support for independent, professional advisers.

“You can join the dots on what might have motivated that,” Fuchs said.

“The talk around the industry was unhelpful. There are some chop shops… that do prey on our members.

“We work with the regulators quietly behind the scenes to help them, but they’re not advisers, I don’t even know what they are. We thought it was important to speak up on the work the profession does.”

Gregory added: “When we see things that don’t contribute to a professional sector, that worries us. The apology Mischa put out was appropriate and we were happy to see that”.

For the masses

Despite the adversarial relationship between retail advisers and profit-to-member funds in the past, the latter has begun to need the former to help deliver better retirement outcomes for members, which has only been further driven by obligations under the Retirement Income Covenant to deliver retirement solutions for members.

Some funds have been proactive in either building internal advice teams, like UniSuper, or external relationships, like ART.

Fuchs said ART will always look to external advisers because it isn’t possible to achieve the necessary scale internally to deliver advice to 2.3 million members.

“It just costs members too much money,” Fuchs said. “We won’t do it, we’re out.”

UniSuper’s Gregory said traditionally the fund had not encouraged use of external advisers but that will change in the future, and he noted there is a large proportion of members who want that flexibility.

“At the moment, we don’t allow fee deductions as an example, and I think we got that strategy wrong,” Gregory said.

“Right now, we’re turning our mind to opening up to external advisers which would include portal capabilities, the deduction of fees, so we can start to follow some of exemplars in the market like ART, so our members that do have a professional relationship with an adviser can work with us really easily.”

Gervasoni, who commented last year that profit-for-member funds are not a singular group in how they approach advice, re-iterated there are still different views over they appetite they have to expand their services.

“There are some funds that see service, help, guidance and advice as the thing they’re going to differentiate on,” Gervasoni said.

“There are others that are going to have to offer advice because there’s a Retirement Income Covenant that requires them to consider it. I don’t think we’ll ever get to the day where they’ll all be equally passionate and driven [about advice].”

Fuchs said funds need to culturally believe in financial advice, noting it took years of hard work at SunSuper (which merged with QSuper to create ART) to make that shift.

“When I started at Sun[Super] in 2015, advisers were the devil, like the proper devil, because every time a third party authority would go on an account the money would roll out in six months, so then the fund would say we hate these people, we’ll treat them like the enemy, and so they’d get bad service and the adviser would definitely roll them out… and it was this vicious cycle,” Fuchs said.

“It was really properly dysfunctional, and it took almost three years for the entire organisation to understand our members have chosen to appoint this person because they trust them and our job is not to be paternalistic about that, our job is to support and facilitate that and get out of the way, because we can’t help them because we don’t have the scale to do it.”