HOSTPLUS took the unusual step in 2007 of bringing its contact centre back inhouse, while Superpartners was retained for backoffice administration. Sunsuper’s member advice centre provides both personal and general advice to members, and following the release of Regulatory Guide 200 by the Australian Securities and Investments Commission (ASIC), the fund is looking to extend the reach of its traditional member service centre to provide limited personal advice. Tony Lally, chief executive officer of Sunsuper, says the intra fund advice relief is much simpler than the On Track service, which includes a tailored financial strategy from a qualified adviser and a series of regular check-ups in the lead up to and throughout retirement.
“In effect it’s between what our member service centre does and what our member advice centre is set up to do,” he says. “At the moment we’re providing the service through our member advice centre but we will be extending that service down [to the member service centre] to cover the simpler requirements of the intra fund advice.” Delegating the simple advice queries to the broader call centre will allow the member advice centre to focus on the more complex, higher value and older members seeking advice, Lally says. However he questions the ability of funds with outsourced contact centres and advice models to adapt to the new advice landscape, given the ASIC relief has added “two extra layers that weren’t there before – limited advice and personal advice”. “To meet those needs as well as general calls and financial planning will require a very close look at how those four aspects fit together,” he says.
“I think it’s going to challenge those funds that don’t have an integrated model. It’s going to be very difficult to have advice outsourced in this particular area.” Lally believes the change will force funds to think hard about how much they outsource and how much they insource. “It’s going to require some very good planning and modelling on how the various services fit together for the members so they’re not passed off from one call centre to another,” he says. “This is a catalyst for the bigger funds to look hard at their model and to see what the value to their members is of having a fully integrated model for their members where they can service all of the various needs now.” RG 200 enables licensed super fund trustees to give personal advice to members about their existing interest in a fund on certain limited topics, including investment options, contributions, insurance (within the super fund) and financial hardship.
Alternatively, ASIC has given conditional class order relief (CO 09/210) from the requirements of Section 945A of the Corporations Act, removing the threat of criminal prosecution for trustees that choose to rely on the relief when giving personal advice. The aim of the guidance and regulatory relief is to clarify existing law and increase super fund members’ access to limited personal advice. As at 30 June, 2009 there were 52 super trustees licensed to provide personal advice on super and able to access the relief provided under CO 09/210. “It’s our understanding that a few funds are in the process of applying to extend their AFSL in light of the intra fund relief, that is that they’re currently licensed to provide general advice and to provide intra fund personal advice to members under the relief in CO 09/210 they must first be licensed to provide personal advice,” says a spokesperson for ASIC.
“It must be emphasised that super trustees can also decide to outsource arrangements to provide scaled intra fund advice under the Corporations Act and in a way that does not rely on the relief. Super trustees and financial advisers can also use the guidance provided in RG 200 to give factual information and general advice on intra fund type issues without applying to ASIC.” David Moxon, fund development manager at Vision Super, agrees funds with their own personal advice AFSL, and inhouse financial planners, will find it easier to respond to RG 200. “I’m developing our plans and processes for implementing RG 200 at the moment,” he says. “It’s much easier for us given we have an inhouse member services area, a call centre, and an inhouse financial planning area.
It would be much harder in my estimation to give simple, practical advice to members if you had an outsourced service.” Vision Super has its own retirement planning services team, including seven financial planners and seven paraplanners. The fund has had its own personal advice AFSL for five years now, and Moxon says those people giving general advice will now be able to provide personal advice as well, without having to refer the member through to a financial planner. “To go through the full financial planning process requires us to comply with the legislation, and do a full fact find to establish people’s circumstances and needs and objectives and that’s fine for people who are planning their retirement, but for a member who simply wants to know how to do salary sacrifice, or how to go about making contributions if they’re eligible for the Government co-contribution, they don’t need to go through all that and they shouldn’t have to,” he says.
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.
Ian Silk, chief executive officer at the fund, says the project is looking at the “whole spectrum of advice and how we can improve the quality of what we do, from one end of the spectrum being purely factual information right through to face-to-face financial planning at the other”. “There are obviously different channels of advice in between those two end points, so we’re looking at the whole gamut of channels that provide advice,” he says. Australian Super already has an AFSL to provide personal advice, but does not currently use it. HESTA, on the other hand, has offered free personal advice to members for three years, and runs an education and advice program in cooperation with the fund’s employers. Member education managers provide education sessions or general advice at employer workplaces, and members that want individual advice about their super are referred to HESTA’s superannuation service advisers (SSAs) for limited personal advice. “This latest change for us is just an affirmation that we can do what we’re doing, but because now we don’t have to give as detailed statements of advice, we’ve got a much shorter SOA that we provide which means that we’ll be able to see more members,” says HESTA chief executive officer Anne-Marie Corboy.
Members with broader financial planning needs or who require advice outside the scope of the limited advice areas are referred to Industry Funds Financial Planning. Although HESTA outsources it contact centre, Corboy says this is not an obstacle, because the call centre does not give personal advice. “The referrals are to HESTA employed staff to provide this advice so the model works for us,” she says. Funds regulated by APRA are able to comply with the ‘suitability rule’ in S945A, meaning their personal advice must be suitable for the member, or make use of the conditional class order relief. However as an unregulated fund without its own AFSL, ESSSSuper, the emergency services and Victorian government employees’ superannuation fund is restricted in how it can respond to the new rules. “For funds that are regulated and do have a licence, it means they don’t have to go down the ‘know your client’ rules so they’re able to more freely adapt to those changes,” says Michelle Boucher, general manager, member relationships at the fund. “Part of the class order is you can’t delegate that authority to a third party (like Industry Funds Financial Planning) so they will still have to abide by the old rules for us to do the same things others are doing under the relaxed rules.”
Boucher says ESSSSuper is considering introducing planners to its contact centre that are able to give limited advice over the phone. The contact centre only gives factual advice, while the member education team provides general advice. Members requiring personal advice are referred to IFFP. “Although it doesn’t relax anything for us to respond, we do need to respond in that it may have created a competitive disadvantage for us in some ways,” Boucher says. “We are looking at potentially bringing on some further planners from IFFP that will get more involved in the limited advice space – they currently operate more in the full financial planning space.” Retail funds are in a stickier spot when it comes to limited personal advice, given their models are built around referrals to financial planners. To offer intra fund advice through their call centre would mean potentially giving up a lucrative part of their business.
Paul Barrett, general manager of distribution at Colonial First State, says advisers are ideally positioned to provide ongoing advice services to their clients. “If it’s a simple enquiry that does not require an element of advice our call centres are trained to be able to respond to basic enquiries, but we are a firm that deals pretty much exclusively with financial planners,” he says. “Ninety percent of our business is through financial advisers, so… our first port of call is to refer clients to their advisers.” Barrett says Colonial has always looked to develop tools that make the advice process more simple and efficient, and will continue to do so.
AMP Financial Services operates under a similar model, whereby all advice queries are passed through to AMP financial planners, or the nominated financial planner for an employer-sponsored scheme. Craig Meller, managing director of AMP Financial Services says most people’s advice needs are broader than just superannuation. “For most people when they’re considering what they’re doing with their super… it’s not a simple ‘yes’ or ‘no’, because for the client there’s usually an alternative and the question is to what extent do you need to investigate and understand the alternatives,” he says. “We are working hard to make sure we can provide full financial advice at a lower cost point and to be able to do it within the context of a super fund, if we can find a way, we’d be supportive of that too.”