According to the regulator’s new whitepaper on advice given by super funds, 61 per cent of funds intend to up their use of self-directed robo-advisers that can produce statements of advice (SOAs).
ASIC surveyed a total of 25 funds, made up of 11 retail (44 per cent), 10 industry (40 per cent), two corporate (8 per cent) and two public sector funds (8 per cent). It also reviewed a cross-sample of personal advice.
Across all funds, general advice made up three quarters (75 per cent) of advice accessed by members, with the most popular topics being member investment choice, contributions and retirement planning.
Currently, the most common delivery channels for providing advice to members are in-house call centres (37 per cent) and advice providers employed by a related party (26 per cent).
The funds were seen to have the following key conflicts of interest: vertical integration, relationships with third-party advice providers and bonuses paid to advice providers.
ASIC commissioner Danielle Press commented that super funds have an important role to play in meeting the financial advice needs of members wanting to build their retirement income.
She warned where the regulator did see risk of detriment, it will be following up with the advice provider and requiring that they “review and remediate the affected member”.
“More broadly, proper oversight of advice fee deductions from superannuation accounts for all advice, not just advice provided by superannuation trustees, is an area of ongoing focus for ASIC working with APRA,” Ms Press said.
Given the small sample size of funds, ASIC noted the study cannot be used to compare advice quality between retail and industry funds.
“We will continue to monitor developments in advice services offered by funds through our regular engagement with trustees and take action as required,” Ms Press said.
Half of personal advice fully compliant
Looking at personal advice given by funds, customised to individuals, only half (49 per cent) of cases examined by ASIC demonstrated full compliance with the best interests duty and related obligations.
Around a third (36 per cent) of the personal advice did not show full compliance, but also did not indicate a member was at risk of suffering financial or non-financial detriment as a result. A reported 15 per cent of cases were not compliant and were found to leave members at risk of suffering detriment.
The main reasons given for non compliance were the advice provider had failed to identify the subject matter of the advice and the member’s objectives, financial situation and needs and the advice provider had failed to conduct a reasonable investigation into financial products and base all judgements on the member’s relevant circumstances.
Four out of the 25 funds surveyed did not provide personal advice to members.
“It was pleasing to see that the personal advice reviewed was generally appropriate for members,” Ms Press said.
