Overhaul needed for intra-fund advice

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In the best interests of all super fund members, intra-fund fees must be transparent.

That is the view of Corporate Super Specialist Alliance (CSSA) president Douglas Latto, who says that there is a general misunderstanding about the type of advice that corporate super advisers provide.

“For an agreed fee, corporate super specialists provide services and general advice to corporate super fund members,” Latto said at the AFA conference on the Gold Coast.

He believes that this general advice should fall under the definition of intra-fund advice, in line with the 16 point agenda of FoFA changes, outlined by the current government. This would effectively remove personal advice, said Latto.

“Personal advice is personal advice and personal advice should be based on a user-pay system - and that should be that.”

Intra-fund fees also need greater transparency. Latto said advisers can adjust their fees by workplace to reflect the work required. Fully disclosed intra-fund fees could then be adjusted to suit the advice required at each workplace level.

“In a post-FoFA, fee disclosure statement world, all fees must have the same level of transparency,” he said. “Many super fund members do not even know they are paying for intra fund advice, even if they don’t access it.”

Latto said that setting negotiating fees at a workplace level would overcome the issue of conflicted remuneration, which supposedly arises when a corporate super specialist provides both product selection and ongoing services.

When it comes to commissions on group life within superannuation, Latto agreed that no payment should be made if services were not delivered. However, he said that this has also resulted in a market distortion.

“At the AFA conference this week, the Assistant Treasurer Senator Arthur Sinodinus seemed to recognise this and indicated a more level playing forward going forward,” said Latto.

“We believe that if commissions can be paid for when the group insurance is outside super, why is it not allowed when inside super?  The amount of work is the same; there is no upfront commission with group and therefore no concerns about churning.”

The CSSA has suggested a dial-up payment as the solution.  “Call it a commission, call it a premium-based fee and it should be transparent. To ensure there is no payment if there are no services it must be agreed at workplace level.”