However Peter Beck, chief executive officer of Pillar Administration, does not believe ASIC’s guidance and relief puts the outsourced administration model under threat. Pillar has a licence to provide general advice, and is considering applying for a personal advice licence too. But Beck points out that the requirement for administrators to apply for a personal licence is no different to that of trustees. “We won’t open up to all personal advice, we’ll limit it and we’ll have a scripted and managed process,” he says. “We’re not going to get involved in having recommended lists of products, for example. As soon as people want face-to-face [advice] it moves away from the contact centre and it’s appropriate that it moves into a different organisation that does that. We pass over people now to the financial planners for our various funds.” The only difference between having an outsourced model versus an insourced model is the penalties that apply for breaking the rules, Beck adds.

“The penalties are basically stricter for an outsourcer than an internal provider, and with this exemption there’s a restriction on what [advice] you can give imposed by the regulation, whereas if you go down the outsourcing route you would put your own restrictions in place,” he says. “If you outsource badly and you go through a whole hierarchical process it can become harder but it’s no harder than a CEO trying to work through his own management layers to get to the staff.” David Anderson, outsourcing business leader Asia Pacific at Mercer says the benefits of outsourcing are generally that you can do it “quicker, better and cheaper”. The advantages of insourcing are a perceived greater control and more intimate member experience.

Anderson says the ability of funds that outsource administration to adapt depends on their outsourcing model. “If you outsource administration to a traditional record keeper who can’t provide that simplified advice then it will be harder, or if you outsource in a way where you’ve retained the call centre it may be harder,” he says. “It depends on the specific model that’s being adopted. For example where the administration and call centre is outsourced to Mercer, it’s very easy for clients to extend that to simplified advice. In fact part of the call centre solution we’ve been running since ’93 is limited advice over the phone.” A number of industry funds have responded to the simple advice relief by ramping up internal resources, and many of those without licences are exploring whether or not to apply for one. The $28 billion Australian Super is considering its options for providing financial advice to members as part of a project being led by general manager of marketing and communications, James Coyle.