The changes proposed by the Quality of Advice Review (QAR) are aimed at providing funds with more clarity on what they can advise their members on but also increasing responsibility on trustees.
Under the proposed changes, trustees of a super fund will be able to provide members personal advice about their interest in the fund, have full discretion to decide how much to charge for personal advice they provide to members as well as pay a fee from member’s account to a financial adviser to provide the member advice.
“The proposals make clear to funds that they can advise on all aspects of what they offer to their members,” said Michelle Levy, lead of the QAR speaking at a webinar jointly hosted by Investment Magazine and MetLife discussing the impact of the proposals on the super fund industry. “While there is more clarity, there is also more responsibility.”
One example of the increased onus on trustees is the removal of section 99F in the Superannuation Industry (Supervision) Act which allows collective charging for advice for certain types of personal advice. “By removing section 99F, it gives an obligation to funds to consider all aspects of what to charge,” she said. Levy received over 170 submissions during the consultation on her proposal which closed last Friday.
Removing barriers for funds to provide personal advice to members received strong support from industry. “Advice brings a critical role in generating returns and good retirement outcomes,” said Steven Travis, group executive member growth at Aware Super.
“The changes…let us work with external financial advisers,” Travis further said. “I would be surprised if the larger funds don’t move into giving personal advice to their members.”
The proposals also expand super funds’ ability to advise members to cover insurance, a move welcomed by Nathan Rees, head of external affairs and public policy at MetLife. “The review is headed in the right direction. It needs to strike a balance between consumer protection and prudential regulation but not go over the top. It also needs to encompass the individual’s risk appetite.”
But he noted it was important to think about the portability of insurance. “There is very little differentiation between different product providers,” he said, making it easier to carry over legacy policies.
However, the proposals may not ultimately lead to cheaper traditional financial advice for Australians, one of the main objectives for the review. “I’m not convinced that there will be a significant drop in traditional financial advice costs nor a sizable uplift in supply of traditional financial advice. I’m open to being pleasantly surprised as submissions roll in,” said David Bell, executive director at The Conexus Institute.
“Our working view is that the proposed changes set up scaled limited advice to be the solution to Australia’s advice needs. The concern is this will likely come with little product advice and the question mark is whether this could result in poor consumer outcomes in some sectors,” he said.