More advisers are finding problems with legislation that make it hard to provide adequate advice while still getting paid for it.
With the implementation of FoFA, coupled with Stronger Super reforms, corporate super advisers helping employers to select a default fund will not be able to receive fees for service from the administrator of the fund, for advice services to fund members.
The concern is that any on-going fee revenue is potentially conflicted remuneration if a recommendation is also made on default fund selection.
In a letter to former Financial Services Minister Bill Shorten, the Corporate Super Specialist Alliance (CSSA) said that this was an “unfortunate and unexpected development”.
“Corporate advisers are severely inhibited in providing choice of default superannuation fund advice to employers if they intend to have an on-going relationship with the fund and its members.”
The advisers are potentially prevented from acting in the best interests of employees/prospective fund members when giving choice of default superannuation fund advice, according to the CSSA’s letter to Shorten. Rather, corporate advisers will be required to consider the best interests of employers – which may be different.
CSSA Treasurer Gareth Hall says that corporate super advisers play a vital role in educating members through seminars and workshops, but these reforms are preventing this from happening.
“If they don’t get proactive education, then they don’t know what they’re missing out on,” he says about members.
The changes in this sector will make it hard for some corporate advisers to survive, says Hall. As members are moved to funds under modern awards, some advisers could be losing up to 40-50% of their revenue, but this won’t be until 2017 thanks to grandfathering arrangements.
Hall says the CSSA has written to ASIC, Treasury and the Minister, but everything is likely to come to a standstill until after the election.
With feedback from Treasury, the CSSA has made suggestions that the SOA preparation process ensure advisers are not conflicted, including a signed employer declaration agreeing which funds should be included in the SoA. If the successful fund is requested to pay on-going remuneration to a CSS, the Trustee would not do so unless the SOA is reviewed by an independent specialist body.