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Industry funds defend advice process

By Tim Stewart
 — 1 minute read

Financial advisers who provide comprehensive advice within industry funds are subject to the same ‘reasonable basis’ requirement as retail planners, according to Industry Funds Services (IFS).

A majority of the advice provided by industry funds is ‘intra-fund’ advice – that is, general advice about the products offered by a fund. This kind of advice is paid for by all members indirectly through their administration fee.

But members also have the option to pay for comprehensive advice from a fully-qualified financial planner, often through an outsourced arrangement with a provider such as Mercer or through an in-house financial services licensee.

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Speaking to Investor Daily, IFS executive manager for wealth management, James Grant, said his organisation is owned by Industry Super Holdings, a consortium of around 30 industry funds.

IFS, one of the main providers of ‘holistic’ or ‘full’ advice to industry funds, currently provides services to 16 funds (notably AustralianSuper, HOSTPLUS, HESTA, MTAA and Cbus) and employs 71 financial planners, along with four authorised representatives, Mr Grant said.

Unlike retail planning operations, IFS is a not-for-profit organisation focused on reducing costs to its superannuation members, he said, adding that IFS financial planners do not receive commissions for putting members into particular products.

The fee charged to members for comprehensive advice is not linked to the amount of funds under advice, Mr Grant said.

“There are basically two elements to how we set a fee,” he said. “There’s an hourly rate for the planner, and there’s also a plan construction element to it.”

When assessing a client’s overall financial situation, IFS planners do not begin with the assumption that their current fund is appropriate, and they are free to switch people into other funds. IFS has an approved product list (APL) that consists of approximately 30 industry and government funds. In addition, there are approximately 30 non-superannuation products on the APL.

"Many of the products on the APL are what would be considered “retail” products with providers such as Perpetual, Platinum, Vanguard and Challenger," Mr Grant said.

When it comes to insurance, IFS currently has Zurich on its APL, with the firm about to add another insurer, he said.

If a client wanted to invest money in a retail fund, an IFS adviser would either research the fund and seek one-off approval to advise on it, or provide high-level strategic advice only, said Mr Grant, noting that clients generally choose the first option.

When it comes to switching products, IFS advisers generally look to their APL for an appropriate product in the first instance, but if no such product exists, they look at the 'profit to member' sphere next. "But we will not hesitate to utilise a retail product if it is appropriate for the client," Mr Grant said.

"We will discuss commission refund options with [clients] so that they are fully informed with regards to any ongoing payment arrangements in place on their product.  We have access to such a service, called MyFunds, which further ensures that simply reducing commissions is not in itself a reason to move people to different products."

 

The ifa Excellence Awards are back in 2021 and nominations are now open! This prestigious accolade recognises exceptional professionals within the financial advice industry, shining a light on the outstanding achievements from the nation's best and brightest. If this sounds like you or someone you know, then nominate today for the ifa Excellence Awards 2021!

 

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