Paragem Partners is launching an AFSL service specifically for super funds to enable them to offer financial advice to fund members.
From 1 May, according to Ian Knox, Paragem’s managing director, funds will be authorised to act under Paragem’s AFSL. The business, to be called, Paragem Member Advice, “will be liable for ensuring the integrity of the advice offered,” Knox says.
“Funds are being called on for advice beyond the limited area of superannuation,” says Knox. “Historically, trustees have had referral agreements in place to introduce financial planning groups –but, nearly 80 per cent of the planning industry is now owned by banks with fund management and platform businesses which create inherent conflict. Also, trustees could arguably be held accountable for a referral that went wrong.”
Funds are having to step into the arena of personal financial advice, says Knox, but it’s a highly regulated and costly area to enter without expertise, infrastructure and an understanding of what it takes to run an advice AFSL in this sector.
“Typically, it will cost between $500,000 and $1 million a year to have the back-office support to provide full financial advice,” Knox says. “This amount varies according things such as the number of advisers in the office, the nature and complexity of the software used, and the number of statements of advice issued.”
Paragem has eschewed the commission model in favour of fee-for-service, and provides licence holders with advice support, compliance, software, governance, research, and practice management. According to Knox, “Paragem is the only provider in the industry that offers this breadth of service without any conflicts of interest or ownership of product.”
In addition to the AFSL service to funds, Paragem will help trustees establish themselves through the structure then assist with an AFSL application for the fund once the necessary expertise is in place, says Knox.