The introduction of the federal government’s proposed low-cost MySuper product, as it stands, will have a detrimental impact on financial advisers and their businesses, an industry chief said.
Association of Financial Advisers (AFA) chief executive Richard Klipin made the comment as part of the AFA’s submission to the Parliamentary Joint Committee’s inquiry into the MySuper bill.
“When added to the implications and consequences of FOFA (Future of Financial Advice reform), this legislation suggests a further decline in the number of financial advisers and a reduction in personal financial advice,” Klipin said.
Klipin pinpointed financial advisers with a corporate superannuation focus as those who stand to lose the most from the legislation.
“It seems, with these two pieces of legislation, that the government has removed access to any existing form of remuneration for these advisers,” he said.
“It is important to appreciate that corporate superannuation advisers can add great value to the members in the selection of a suitable superannuation fund, including insurance arrangements and ongoing support of members of that fund.”
As well as raising the AFA’s direct converns over MySuper, Klipin also addressed the association’s issues with MySuper’s links with intra-fund advice.
“The AFA strongly opposes the suggestion that intra-fund advice can be cross-subsidised across members of a MySuper fund,” he said.
“It seems that the overall intent of MySuper is to avoid any risk of inequity except for allowing cross-subsidisation of advice.”
Such a move would result in ‘distorting the consumer appreciation’ for the true cost and value of advice, he said.
“This is a dangerous position to take, if the government genuinely wants to support the financial advice industry,” he said.
“The cost of advice should be directly paid for by those who use the advice service.”
Another area of concern raised by MySuper is transparency within super funds, particularly in relation to the FOFA debate and conflicted remuneration, the AFA said.
The AFA has taken particular issue with the fact that registrable superannuation entity (RSE) licensees can receive payments from insurance and fund managers.
“These payments potentially pose a conflict of interest and should be fully disclosed, including whether the funds flow through to the benefit of members or not,” Klipin said.
Meanwhile, the AFA supports full remuneration disclosure with respect to the directors and senior management of RSE licensees, he added.
