Media Release: New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.

New rules on intra-fund advice set to provide more accessible and affordable financial advice to all Australians

Media Release by ISN  shows the new rules issued by the Government on the delivery of ‘intra-fund’ advice will make financial advice more accessible and more affordable for ordinary Australians.

Read the Media Release here.

Briefing Note: Members Getting the Super Advice They Need

This Briefing Note provides an update on superannuation related financial advice services, which are provided by industry superannuation funds to their members.

This Briefing Note documents observable trends in the adoption of intra-fund advice, including results of a survey of seven large industry super funds, and identifies future likely developments in the area of simple financial advice.

Read the Briefing Note here.

Members Getting the Super Advice They Need

This Briefing Note provides an update on superannuation related financial advice services, which are provided by industry superannuation funds to their members.

This Briefing Note documents observable trends in the adoption of intra-fund advice, including results of a survey of seven large industry super funds, and identifies future likely developments in the area of simple financial advice.

Read the Briefing Note here.

Setting super up for the future

The current reform agenda for Australia’s superannuation system represents a vital step towards the democratisation of financial advice and will enable ordinary workers to access information and assistance that was previously only available to wealthier Australians.

In a recent speech to the IQPC Mergers and Acquisitions Conference, ISN Chief Executive, David Whiteley, outlined the importance of the Future of Financial Advice (FOFA) and Stronger Super reforms in reshaping the super industry and the financial security of working Australians.

He believes the reform packages will enable greater participation and engagement by employees in saving for their retirement. They will also assist many ordinary Australians to build their financial knowledge and security.

Intra-fund advice builds demand

An important element in achieving these goals is the introduction of intra-fund advice services by super funds. ‘Intra-fund advice fills a gap in the market which has existed for many years,’ David said.

‘Where 80% of members are found to need transactional, one off advice, industry super funds offer it. Where people want more complex advice, or their personal circumstances are more complicated, then a fee is paid and the advice is delivered face to face or via the telephone.’

This represents a major change, as it allows ordinary workers to access financial advice – many for the first time in their lives. ‘The democratisation of financial advice is underway,’ said David.

While industry super funds recognise the need for financial advice services and the value they can play in building the wealth of members, the current regulatory settings and business models of much of the financial advice industry is not suited to the needs of most Australians. Many are not seeking financial advice as they regard it as too expensive or only suited to wealthier people.

David believes the introduction of intra-fund advice will be vital in increasing the availability and use of financial advice. ‘This advice is the first experience many fund members have of receiving financial advice. It will encourage them to experience the value of advice and thus seek more advice and increase their retirement savings.’

‘Our engagement in the debate about financial advice has never been about its value, but about the conflicts of interest in the first instance; and its scalability and affordability in the second instance,’ he said.

Transparency vital for default selection

Implementation of a transparent selection process for workplace default funds under the Stronger Super reforms is also vital to the democratisation of retirement saving and wealth creation.

According to David, the process through which workplace default funds are determined is central to the integrity of the super system. ‘Suitable objective criteria are required to guide employers and employees, or their representatives, to determine funds that are eligible to be workplace default funds. These objective criteria should set a high bar as this is essential to ensure only funds which deliver strong net returns and appropriate member services are eligible for selection as a workplace default fund.’

Three principles

ISN supports three principles for the selection of workplace default funds:

• The process to determine default funds must be a matter for the parties at the workplace, with the decision jointly by employers and employees or their representatives.
• The decision must be made considering suitable objective criteria which the fund should meet.
• Long term net investment performance should be central to their criteria.

‘ISN advocates a transparent process to determine workplace default funds and this precludes a process where employers alone select the fund,’ David said.

A bipartite approach involving both employees and employers is fundamental for the integrity of the system. ‘This approach reflects the views of employers. Most feel no better equipped to choose the fund than their employees and do not want the added responsibility of doing so.’

The FOFA and Stronger Super policies will establish Australia as having the world’s best super system through the development of default settings and consumer protections. ‘However, these default settings must recognise and accommodate the imperfections of consumer behaviour rather than exploit them, and encourage and facilitate investors to make their own decisions to develop consumer sovereignty,’ David said.

For more information about the selection of workplace default funds, click here.

For more information about the future of intra-fund advice, click here.