Intra-fund advice costs less than $3, but who uses it?

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The median yearly fee per member for intra-fund is less than $3, reveals a recent survey, but is the advice provided worthwhile?

Pauline Vamos, CEO of the Association of Superannuation Funds of Australia (ASFA) says yes – as long as it remains limited, and a sort of ‘general advice plus’.

Her comments to Wealth Professional come after a just-released ASFA report, which uses research conducted by ASIC and Rice Warner, to demonstrate the seemingly very low cost of intra-fund advice.

The report found the median cost for the advice equated to $2.81 per member per year, with an average per member per year cost of $9.65.

The bulk of this cost of scaled advice (87%) is covered by general administration fees charged automatically to members by funds, or a combination of general administration fees and a specific fee for the service provided.

A major criticism of this scaled advice has been the lack of transparency in that the fees are often hidden within administration costs. Many have called for greater disclosure or an opt-out option.

One fund interviewed in the report said only five per cent of the members who call the general helpline were referred to the financial advice helpline for intra-fund advice.

However this fund also asserted that the shared cost of scaled advice among the members meant the advice became accessible, affordable, and efficient to deliver.

“Previous experience indicates that if we try to charge for these services, there are extremely low take up rates. Also, the cost of administering payment outweighs any benefit,” it reported. “Members generally call us for help, not advice. They may land up getting advice because of regulation, not because they asked for it, prefer it, and are prepared to pay for it. In fact, when relating to their super fund, they expect the cost of super should cover the provision of “help” and are horrified if we try to charge for it.”
But Vamos said the low take up rate is because intra-fund advice is still a relatively new concept, which will become more popular as people grow older and more engaged.

The relatively small number of members who use the advice in comparison with the number who help pay for it is not abnormal, she said, comparing it to purchasing an insurance policy which may never be used.

“Advice is only one part of the overall service. For example, you may never use a call centre in your life, but you expect it be there. Intra-funds are the same. It’s the cost of business – it swings in roundabouts.”

Intra-fund advice should remain a compulsory cost in any superannuation fund, as long as the definition remains the same, Vamos said.

It was intended to be a sort of add-on to general advice, which has a very low scope, she said.

“Provided it’s not abused, [intra-fund advice] should be a part of the normal service of any superannuation provider. But we mustn’t have scope-creep… It should be a general advice plus, not a personal advice minus.”


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  • Innocent Observer on 19/03/2014 3:34:11 PM

    Right. Let's get this right. An average of $9.65 p.a., per member. median of $2.81 per member.

    So let's say that the "average cost" of advice is $1,500; that would imply that each year one in every 155 members seek advice. On this basis if the median cost is $2.81 per member this would suggest the median cost of advice is $436 (155 x $2.81). So 50% of people are paying less than $436, and 50% are paying more than $436. It doesn't take a mathematician to figure that this means that the fee scale is pretty wide.

    Firstly, what kind of advice can you get for less than $436? Anyone? Our compliance costs (per client) are close to that figure.

    Incidentally, if we made a further assumption that the "average" fee for those paying less than the median was $300, it would suggest that the "average" for the 50% paying more than the median is $2,700.... which in my opinion is an exorbitantly steep fee to pay general advice.

    Also, I'm not sure that I would declare a take-up rate of one in every 155 (or whatever the numbers end up as) as a success.

    Finally, if ~ 87% of the cost is covered by general admin fees, then how is this any different from the commissions that some advisers receive on investment/insurance products? It's taking a clip from everyone to subsidise the cost of those who require ongoing service.

    I'm actually not against the idea of super funds providing general advice services, but I think that if we are going to have the conversation it needs to be open and transparent.

  • Phil on 19/03/2014 10:36:10 AM

    I love the idea!

    Can i expand this idea and get the council to charge all the residence within a 5km block from my office a median price of $3 or an average of $9.65 per year (what the??) through their council rates?

    This way when they drive past my office they have to option to read my phone number and give me a call for general advice regardless of if they choice to use it or not. . . . . you know its like swings and roundabouts.

  • Investor on 19/03/2014 10:31:14 AM

    A person with a grade 2 education would know that advice does not cost $3. What moron would show their amazing level ignorance, by writing this. I defies belief that a person can get a job with this level of mental incapacity. Even the most basic level of maths tells you this cannot be the case. No doubt from the left, as no one with a brain would say such a thing, let alone put it on the net for perpetuity.

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