Adviser hits back at ISA

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Adviser Melinda Houghton, of Houghton Strategic Solutions, has spoken out at the unfair treatment clients – and advisers – get at the hands of the industry super network.

Houghton is upset by three cases she recently took on where the clients were mistreated by the industry superfund they had signed up to.

In one ongoing case,  Houghton had a woman come to her as a new client in November. The woman – terminally ill with cancer – cannot get a pay-out for her medical treatment from her provider Care Super.

“They have come back to her to say they are aware she is a sole trader and they are awaiting company information, like company tax returns, from her before they assess the claim,” said Houghton.

“I explained to them that sole traders are not companies. Companies are separate types of business entities, but they didn’t understand and said she still has to come back to them with the information. So they are asking someone who is extremely ill and about to die to provide them with information she doesn’t have and is totally unrelated to the claim.”

Houghton now has to put herself at risk by acting on the woman’s behalf by forming her word for her in writing, as the woman is too sick to do so.

“At the moment we don’t know what will happen. She’s getting no money towards treatment. Her condition is generally six to 10 months of life after diagnosis.”

The next incident is “absolutely appalling”, said Houghton.

The mother of Houghton’s young client – who again became a client after she found the fund would not pay out – had made a non-binding nomination of her super and life insurance of 50% to her second husband and 50% to her daughter.

The stepfather completed forms when mother passed away and nominated the daughter as a non-dependant, and the superfund – Australian Meat Industry Superannuation Trust – declined the mother’s request and gave 100% of the money to the stepfather, without giving any reason.

“So we established the daughter was financially depended on her mother and put this in writing to the superfund. The daughter is a single mother in her early twenties and needs the money, while the husband is financially secure.”

Houghton still hopes for a positive outcome on this case.

“Clients don’t understand the risks and there is no reason to propel the fund to tell them of the risks. Advisers have a duty to their clients to tell them about the risks, but super funds don’t. What happened in this case is the trustee has decided to go against the clients wishes.

“It’s not illegal it’s just immoral. There’s no justification for that. And the superannuation complaints tribunal process was too much for a grieving young 22-year-old.”

In the third case Houghton is unhappy about, a client with LUCRF Super increased his life cover from the default to about $440,000. He was subsequently diagnosed with liver cancer and passed away within five months.

“The superfund held up the claim for 12 months saying because he increased his cover he knew he was going to die. This guy was healthy, but liver cancer is quick. Five months is actually a long time to survive liver cancer,” Houghton said.

Meanwhile, his widow and two kids were desperately awaiting the pay-out.

“The superfund was delaying, delaying, delaying just because they felt like it…The stress on that family was unbearable.”

Houghton’s firm got involved, ringing the super fund weekly until they paid up. “But it should have taken less than three months,” she said.

The problem with all these cases – and many others – is the consumer does not understand the risks involved in an industry super fund, Houghton said.

“[ISA] portrays themselves as high quality and offering financial advice and quality products , but they don’t offer the advice and they don’t tell clients about the risk.

“If the client is aware of the risks involved and they choose it anyway because it’s cheaper, then that’s fine – but that’s not the case. The [ISA] is basically putting down the financial advice profession which is trying to help these clients by constantly telling the public that we are doing a bad job. And that’s what needs to change.”

Houghton thinks most financial advisers are doing a “brilliant job” at helping people resurrect their finances.

“But we’re totally sick of being put down by the industry super network. The blatant television adverting – ‘compare the pair’ – it’s just rubbish, it makes no sense, and it’s very frustrating that uneducated consumers, generally the ones who won’t seek advice, believe the advertisements and take on major risk,” she said.

“It’s a bit like working for someone and getting smacked over the head at the same time. We’re the pariahs. The only reason we still do it even though we get abuse for it is because we know we are making a difference in people’s lives.”
  • Mark Thompson on 5/03/2014 11:31:31 AM

    Paul CFP, your story re TAL Group has made me feel sick to the stomach. I have a TAL Legacy Policy retail story with a similar theme; an attack on pre-disability earnings with an intent to lower the benefit payment. Hey, if any of you have clients paying rent to an entity that they control, such as a trust or SMSF then check out attitudes from various insurers on what is income and what is an expense. I've done the exercise and you will be surprised. Forget logic, it doesn't come into it.

  • Paul CFP on 4/03/2014 3:59:35 PM

    Well GAB, yes they do but they don't call it commission. The group insurer pays an 'Administration fee' to the platforms (either ISF or Master Fund) in some cases I've seen up to 12%. This is not disclosed to members.
    In the recent hikes in TAL's rates, they removed the commission component previously paid to us but members ended up with higher premiums over-all. So much for the political philosophy that removing the advisor will reduce costs for fund members. What a joke.

    An the claims front, I have had some truly horrific cases arise where Group insurers welch on claims for ridiculous reasons, this one being my favourite. A member was truck driver earning $72k pa with Salary Insurance of 75%. He lost most of his sight and couldn't drive. Eventually he lost his job because he was not able to physically do it. He did, however, open the gate for people at a footy ground for about $10 an hour. After processing a claim, which took 9 months (not 90 days) to complete, they disallowed the claim as he had "returned to work" (any work). Later after the footy season finished and he had no money at all, we re-applied for a claim which was accepted but, because his earnings in the last year (from footy gate opening) were averaged over a 12 month period, his insurance was 75% of a monthly figure of $416 pm NOT $4,500. The claim payment figure was not off-set by entitlements to Sickness Benefits (although the insurer pointed out that they were within their rights to do so). Good old TAL.

  • GAB on 3/03/2014 4:42:05 PM

    Thanks Pat for that info. Quite interesting really..i just compared life cover premiums between two industry funds and a horrible greedy retail platform. Pretty similar really, except the retail premium pays someone to set it up and ensure the application is correct and fully underwritten upfront. The industry funds don't, yet the premiums are right up there. Please don't tell me the industry super funds are pocketing commissions from the life cover....surely not.

  • Pat on 3/03/2014 11:12:09 AM

    Compare the pair (cut and pasted from AFR):

    AustralianSuper, the country's biggest industry superannuation fund, has written to its 1.1 million members warning them their life insurance premiums will rise sharply for the second time in less than 12 months. The fund, which manages more than $70 billion of assets, will also reduce the level of cover for many new members in a sign that conditions in the life sector are deteriorating further. Premiums, which will increase by as much as 75 per cent to cover policyholders who fall ill or have an accident, would have risen even further but for a decision by the fund to lock in the rates for only 12 months. AustralianSuper's new five-year contract with TAL allows premium prices to be renegotiated annually.

  • Les Miller on 19/02/2014 5:11:37 PM

    Isn't it time to name and shame these people? I am tired of the pain they cause clients who are already suffering and are then subjected to an administrative and bureaucratic nightmare to claim their rights. Who are these people?

  • Best Interest on 18/02/2014 3:33:29 PM

    This is precisely why the ISF sector don't want their clients to have financial advisers. They know the average Joe doesn't know better and will just accept their dodgy behaviour.

  • Simon on 18/02/2014 9:08:57 AM

    Then answer is simple - do what 963,000 other honest hard working Australians have done - get yourself into a Self Managed Super Fund SMSF

  • Alan on 17/02/2014 11:17:29 PM

    This subject has obviously generated a lot of concern and passion, not surprisingly. I would make just 3 quick points; firstly, completely ignore Whiteley, he is just pushing his own midleading bandwagon; secondly, I would always advise not to use an industry fund as they have undisclosed hidden fees and thirdly I would even suggest industry funds should be declared illegal after their lying and disgusting 'compare the pair' advertisements.

  • Rod on 17/02/2014 4:20:06 PM

    The last time I read such self deluding and misinformed material was reading the membership application for the American Rifle Association. I think you will find that both retail and industry funds have a history of insurance related issues. I don't think either side is immune from delaying tactics employed by insurers. In fact, I think you will find there are more matters with FOS relating to retail world insurance issues than there are ISF's. Surely with ISF's having a higher membership base they would have more complaints against them?

  • Wally on 17/02/2014 9:55:51 AM

    Some great examples showing ISN is not what it purports to be (for the members). If only we could have truthful reporting in the sector instead of propaganda. What hope does the retail client have and it is no wonder there are trust issues around advice. One side claims all advisers are crooks and then continues to let members down with poor service, while the other side is too divided to return a counter argument preferring to sledge each other (FPA, AFA, IFAs, bank advisers, etc.). A united front would be a good start for the advice community and would maker it easier to remove the element giving advisers a bad name. It might also take away some of the ISN ammunition.

  • Simon on 17/02/2014 9:06:21 AM

    The three examples are terrible and they are examples of how all Industry Funds deal with members superannuation. CBA & JH's mother-in-law as well as Storm are not representative of an industry so we agree on that. However the use of members superannuation monies to promote a superannuation sector is a misuse of members benefits and in any other fund it would constitute a breach of the Sole Purpose of super. Levying contributions tax on members before it is actually payable is just the beginning of what Industry Super Funds get up to.

  • Tim Lindsay on 16/02/2014 8:31:28 AM

    Just my experience: I recently dealt with a terminal Illness claim and lodged concurrent claims with a bank-owned life company and a large ISF. We wondered in the office who would pay out first, and expected problems with the ISF.

    As it happens, the ISF isseud the cheque first but only just ahead of the other insurer. Fortunately for my client, both did so fairly promptly and without hassle, which was fantastic.

    That said, I don't deal with many claims so I may have just got lucky. However, I have continually found the ISN's tactics and advertising blatantly misleading and anti-Adviser. Yet they advertise in some trade mags asking 'why we would recommend anything else"!!

    I'm not a real fan of Industry Funds and believe that you get what you pay for - limited options, limited service and returns that are comparable with other decent wholesale funds WITH SIMILAR ASSET ALLOCATIONS! Balanced Fund is the most misused description in the universe.

  • Chris on 14/02/2014 4:39:49 PM

    These three examples are terrible, but hardly damning of the entire Industry Super sector.

    Joe Hockey's mother-in-law was ripped off by a CBA planner...does that mean all bank-aligned advisers (hell, maybe all banks!) are corrupt?

    Storm Financial was an independently licensed financial advise business...does it's failure mean all IFA's are crooks?

  • alleycat on 14/02/2014 4:21:57 PM

    There are a litany of issues surrounding industry funds that we have and can all relate.
    One of the biggest issues is the lies they tell when a member decides to rollover their super to another fund.
    Not withstand the choice made by the member, it's abundantly clear that the ISA regards a members funds theirs and will not relinquish/release them when requested to do so.
    If Tony Abbott is to have a Royal Commission into the Trade Union movement, perhaps that can be extended into how ISA operate.
    I'm sure Mr Whitely etal will and should be looking for employment elsewhere

  • Greg Lanyon on 14/02/2014 4:08:32 PM

    I have a client experiencing a similar situation with Sunsuper still waiting for a TPD claim for over 2 years and in that time they have lost the paperwork twice of which we had to supply now 3 times and the saga continued

  • gf in Bris on 14/02/2014 1:09:59 PM

    its time that the retail providers and the dealer groups started court proceedings to highlight the fact that these indusrty funds are not telling the truth & are misleading the public. This is the only way that the public will become aware of all the BS because it will be reported in the media.

  • Adam on 14/02/2014 1:06:08 PM

    I feel your pain. An indutsry super fund (I won't embarass them by naming them) refused to rollover a death benefit pension to a spouse because they couldn't understand that taxation and superannuation laws were linked, and that it was permissible to do so. After the dispute sat sitting at the SCT for 18 months (with no progress), we had to lobby the Regulator (via the NTLG) to release exactly what was our original submission as their official view, for this super fund to wake up and realise that they were wrong. 2 years after the member's death, the benefits were allowed to be rolled over. Industry Super Funds is where the ignorant and apathetic go to die.

  • Karyn Hilton on 14/02/2014 12:20:52 PM

    Well said Melinda and I have had some similar experiences. These types of issues tarnish our industry and dont encourage Australians to seek advice and take out cover. I have and will never recommend my clients actually take out cover in industry super funds as it is just not worth the stress at claims time.

  • CY on 14/02/2014 11:41:41 AM

    Highlighting these examples of service and administrative issues with the Industry Super Funds just makes a complete and utter mockery of David Whiteley's comments that a review of the Labor govt's fastracked, "policy on the run", FOFA legislation may destroy consumer confidence in seeking financial advice and the industry as a whole.
    What could destroy a consumer's confidence more than the examples that Melinda Houghton has highlighted?
    I bet the ISA don't want to advertise these examples...but perhaps they could publish Melinda's examples on their "unbiased" online news feed, The New Daily for all their members to take in and to independently make their own decisions about?
    The New Daily was touted as being unbiased and bringing important issues relating to matters of superannuation and other financial topics to it's readers,so, I don't think they would have any problem with having Melinda's story up on their site in a prominent position!
    As the Trustees of Care Super would be involved in the final decision of releasing benefits of a Terminal Illness claim as a pre-payment of Life Insurance proceeds, and have the responsibility to ensure decisions are made in the best interests of their fund members,it raises the question that intervention long before the suffering administered to the member in question has possibly not been forthcoming.
    It appears the Care Super Insurance Guide refers to the insurer for Care Super as Comminsure.The Insurance Advisers for Care Super are IFS Insurance Brokers, a firm that delivers insurance services to Industry Funds Network clients.
    It also appears that the definition for Terminal Illness under Care Super incorporates a 12month time frame to death, based on medical evidence.However, it also appears that if in fact a member was deemed to be terminally ill, in the event that member also had the Income Protection Insurance benefit in place, that this benefit would immediately cease upon the date of the Terminal Illness benefit payment.
    So, if in fact a Care Super member continued to survive for the full 12 month period or in fact longer, it appears their Income Protection monthly insured benefit would then not be paid.
    I wonder how often certain detail is relayed to new or existing members of funds, so clarity of the relationship between insurance benefits and claims is well understood ?

  • Sam on 14/02/2014 11:20:21 AM

    Shocking stuff.
    this wouldnt happen in the real world of high commissions. i can stand here, hand on my heart, and say that i have never ever had an issue with any "for-profit" insurer or super fund, just like Melinda.

  • Julie on 14/02/2014 10:52:35 AM

    I'm a so glad to be a Certified Financial Planner and followed my own advice - a comprehensive insurance plan for me and my husband. Sure I could have got cheaper premiums with new player in the insurance market such as an industry based super fund. But paying extra was absolute peace of mind, especially when my husband was diagnosed with cancer, and got his payout in three weeks. He died a few weeks later.

  • John Walker on 14/02/2014 10:43:20 AM

    I heard the other day that a person on salary continuance in an ind fund will have it cancelled when a diagnosis of permanent disability is made .... even if the benefit period continues

    shame on them

  • Mervin C Reed on 14/02/2014 10:40:50 AM

    It should be a very simple matter to put an industry super fund blog up on the AFA site and publish in the trade press the most blatant ISN client cock up of the week. The more of these that get published the sooner the mainstream media gets involved.
    What about rollover cock-ups?

  • Jo Tuck on 14/02/2014 10:38:54 AM

    I agree Melinda. Industry super funds need to move with the times, too. I have been dealing with QSuper for years and have a lot of Queensland Government clients. We used to have an authority to obtain information that was in force unless revoked. Now we have to renew each year, cannot have a corporate authority (and thus must list every staff member who may ring to get information over the year) and have to put up with QSuper then ringing the client to check that they are OK with us obtaining information as well as asking the client if they are happy with their adviser. I made a complaint to QSuper who advised that it was "in the interests of protecting the security of our members' personal information" and that a new authority "should be relatively convenient to provide". SuperStream is far more dangerous and we don't have the time nor money to get information for the fun of it. I am more than happy to recommend industry funds if they fit the client brief but we need to have an efficient working relationship to do this.

  • Matthew on 14/02/2014 10:36:58 AM

    I am similar problems with 2 Industry funds in regards a TPD and IP claim for a client. 4 other funds have have already paid out. The claims were lodged simultaneously in April 2013. It makes a mockery of the statement on their "on hold messages" That they are here to help our members. I will never ever recommend Industry super funds or their supposed member friendly insurance.

  • carl on 14/02/2014 10:27:58 AM

    I completely understand what Melinda is writing about and John, you are missing the point, completely. No need for 'motherhood statements' and philosophical posturing.

  • Simon on 14/02/2014 9:56:00 AM

    Well said Melinda
    You may not be aware but Industry Funds treat their members unfairly long before any disputes or claims are made - example, did you know that industry funds charge tax against a members account when the tax is not actually payable. In fact they charge members capital gains tax when an asset backing the members account is not realised; unit prices of their investments are also calculated on an after tax bases with the surplus funds going to reserve within the super fund. These reserves (which should have been sitting within a members account) are then used to fund activities like tv advertising directed at recruiting new members. How does this type of activity meet the sole purpose test??

  • Wally on 14/02/2014 9:47:35 AM

    I agree with Melinda 100%. ISN are running a propaganda war and would happily see the public receive no advice because it means more passive money remains in their funds. They have one interest and that is to fund their political ideology. You get what you pay for and industry fund service levels are mediocre at best. It shows at times like those described so well by Melinda. In any other industry this denigrating the oppostion advertising would not be legal, but ISN have so claimed the high moral ground they can say what they like. It's an absolute disgrace that advisers are portrayed this way whent their is rampant corruption in the unions that benefit from the industry funds. Advisers are made to disclose all and its time the playing field was levelled for the holier than though ISN.

  • CFP on 14/02/2014 9:45:54 AM

    Recently I saw a client for retirement planning, they had a significant amount of money in Aust Super, Ind Fund. I wanted to retain and continue with it. I contacted them to register so that I could be registered and paid through the fund. I was told that some one from adviser services would call me in 48hrs. Cut a long story short, it took multiple calls, letters of complaint and 3 weeks before a bdm called and explained the had capacity issues servicing external advisers. Then the dealer group had to engage and sign up first. So even when you want to work with them, no joy

  • Mark Thompson on 14/02/2014 9:45:37 AM

    There is often an additional layer of complexity with ISFs because they outsource the insurance, but want to act as the intermediary between the member and the insurer. At best many of the employees of an ISF are just ignorant, and at worst ignorant and lazy. I found that bypassing the ISF and doing straight to the group insurer can speed things up. The group insurer doesn't have to do this, but in general they realise that if an adviser is going in to bat for a member and is not going to go away they will play ball (nice blend of 2 metaphors if I must say so myself).

  • John on 14/02/2014 9:43:01 AM

    Well done Meldina for having the guts to say it as it is, many of us have similar stories to tell, perhaps that should be a focus for Professional Adviser Association's in that they should canvass their members and encourage their members put all their cases out there!

  • Andrew Gaston on 14/02/2014 9:40:40 AM

    Well said Melinda, I believe there are many instances of this.

    One of my clients was unable to work and was only sent the TPD claim form and not the income protection claim form. He thought that was all that would be paid out.

    Another would not pay the claim because he had 2 glasses of beer and wasn't 0.00%, was still well under the 0.5%. Little clause in the PDS.

  • John on 14/02/2014 9:30:02 AM

    You do know that Insurers assess claims and need to accept and pay the benefit before it can be released by the fund right? I'm not saying the fund is making it easier but they would only be asking for the documents the Insurer claims they need. No mention of their name at all?

    Claims are emotional at the best of times and this highlights the need for people to get advice BEFORE something happens so their Insurance needs and estate planning suit their situation.

    We should be using these examples to explain the value of advice to consumers and put pressure on the insurer to come clean.

    Doesn't have the same ring to it though does it?

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