The ban on conflicted remuneration under the FOFA and the Stronger Super legislation is set to destroy the business model of corporate super advisers.
“Corporate Super Advisers have typically relied on ongoing fees and commissions paid by the fund for the provision of these services to members instead of receiving a fee paid directly by the employer,” said the CBA in a submission to the Senate inquiry into the FOFA amendments.
“The combination of the ban on conflicted remuneration under FOFA and the Stronger Super legislation has removed the opportunity for corporate super advisers to receive remuneration in this manner,” it said.
The submission pointed to the final report of the FOFA bill, released in February 2012, which stated that corporate superannuation specialists “promote choice in the market” and “these valuable services should continue to be provided”.
“The committee believes that corporate superannuation specialist firms should continue to receive benefits where they represent a ‘reasonable fee for service’ or a value of scale efficiencies,” said the FOFA report at the time.
As a result, there was “some expectation” that third-party corporate super advisers would be able to receive intra-fund advice payments from a trustee for offering their service to employees, said the CBA.
ASIC’s refusal to issue a ‘no-action’ letter in situations where intra-fund advice is provided by corporate super advisers has caused CBA to be “concerned the ban on conflicted remuneration applies in these circumstances”.
“We remain of the belief that this outworking has unintended consequences which need to be resolved to ensure FOFA can truly deliver on its original aim of providing access to affordable advice for more Australians,” said the CBA.
“We believe this circumstance could be addressed by an appropriate modification of the application of section 761G of the Corporations Act 2001 to treat employers as wholesale clients for the purposes only of the conflicted remuneration provisions of Part 7.7A,” said the submission.
“In the context of advice given by corporate super advisers as discussed above, the employer would no longer be the retail client and instead only the employees/ prospective members of the fund would be treated as the relevant retail clients for the purposes of conflicted remuneration,” said the CBA.
“This would also mean, in providing advice to the employer on the selection of a default fund, the best interests obligations would apply with respect to the interests of the employees/members who actually benefit from the fund selection decision and benefit from the receipt of the ongoing provision of services by the corporate super advisers,” said the submission.
“The solution mentioned above addresses these arrangements for the purposes of the conflicted remuneration provisions and better facilitates intra fund advice by persons familiar with the fund,” it said.
