Non-aligned financial advisers and their aligned counterparts were free to charge clients an across-the-board administration fee for basic advice under the federal government’s draft financial advice laws, according to Treasury.
Treasury retail investor division general manager Sue Vroombout told a Parliamentary Joint Committee (PJC) hearing that the Future of Financial Advice (FOFA) reforms did not prevent advisers from structuring charges in a way that reflected intra-fund advice fee structures used by industry superannuation funds.
“There is nothing in FOFA that prevents a financial service provider providing particular services that are free to the recipient but charging it as part of an administration fee,” Vroombout told the hearing last week.
She added that banks were also free to use the fee structure under FOFA.
Intra-fund advice fees are collectively charged to industry superannuation fund members. Concerns have been raised over the fact that fund members who do not seek advice are subsidising those who do.
“The nature of intra-fund advice and, I guess, the purpose of its definition is that it is the sort of advice that can be collectively charged to the membership,” Vroombout said.
The comments were part of a day-long hearing before the PJC on the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011.
PJC member Paul Fletcher asked whether a financial planner in private practice could impose a fee on all of their clients who happened to be on the client roll and then say: “This is the fee and if anybody wants to call me, I’ll give you advice and I won’t charge you anything more.”
“Would that be consistent with FOFA?” asked Fletcher.
Vroombout queried: “If a client agreed to pay a fee?”
“On that basis,” Fletcher said.
“On that basis, there is nothing in FOFA which would prevent that sort of arrangement,” she said.
Fletcher asked whether Treasury saw any competitive neutrality issues around regulating the provision of financial advice through a superannuation fund under the remuneration or the payment arrangements that intra-fund advice permitted versus the regulation of financial advice provided by financial advisers under FOFA.
“I am thinking particularly of independent financial planners,” he said.
Vroombout said: “I do not see the competitive neutrality issues.”
