Australia’s super industry has set out to reinforce its financial advice standards after an ASIC review found scope for improvement.
The review examined different kinds of financial advice provided to members of 25 super funds, including industry, retail, and public sector funds.
It found the advice being given to members was “generally appropriate”, with 49 per cent of the files reviewed ticking all boxes set out under ASIC’s ‘best interests duty’ – a rule that means financial advisers must be able to show why their advice should result in the best outcome for their clients.
A further 36 per cent didn’t quite hit all those compliance targets, but showed no sign that “the member was at risk of suffering financial or non-financial detriment” if they followed the advice.
“Superannuation funds have a very important role to play in meeting the financial advice needs of members wanting to build their retirement income,” ASIC commissioner Danielle Press said.
“It was pleasing to see that the personal advice reviewed was generally appropriate for members.”
ASIC looked at general ‘intra fund’ advice, which doesn’t take into consideration members’ financial circumstances outside of their superannuation balance, and personal advice offered by some funds.
Personal advice takes a more comprehensive look at each individual’s needs, but is a more involved process that is more heavily regulated.
Personal advice represented only around 25 per cent of the advice given by super funds.
Funds look for chance to improve
Though ASIC was mostly pleased with the advice being given by super funds, the review did note a few areas where they could improve, and outlined a number of steps that advice providers and super trustees can take to improve services.
For trustees, these included keeping a closer eye on quality, regularly reviewing for conflicts of interest, and clearly communicating to members what advice they are entitled to, and what its limitations are.
ASIC’s tips for advice providers included rigorously checking financial products before recommending them, conducting ordinary and impromptu audits, and refusing to give advice when a conflict of interest arises.
Industry Super Australia’s head of research Nick Coates said ASIC’s review represented “an opportunity for funds to look at and further strengthen” their advice services.
“Industry super funds work hard to provide affordable and quality financial advice, and have a strong record of advocating for member-focused reform, such as the Future of Financial Advice changes,” Dr Coates said.
“As part of this commitment to putting members’ interests first, industry super funds review advice offerings to improve members outcomes, and have risk and conflict management strategies in place to ensure they are providing best value for members when it comes to advice.”
However, Dr Coates said ASIC could take a more active role in improving advice within the super sector.
“Given the current uncertainty facing the advice sector, it’s important we also see real progress, engagement and reform from the regulator on the issue of access to advice so members get access to more cost-effective quality financial advice, not less,” he said.
Sally Loane, chief executive of the Financial Services Council (FSC), added there is “still more work to be done” to make sure members who receive financial advice get the best possible results.
“Quality financial advice can result in Australians making the most of their superannuation savings upon retirement,” she said.
“The FSC will review the report in more detail and continue to work with ASIC to support the provision of quality advice.”
Push for stronger compliance
Eva Scheerlinck, chief executive of the Australian Institute of Superannuation Trustees (AIST), said the quality of advice and the way it is delivered to members can be improved.
Ms Scheerlinck noted that many funds look poised to grow their financial advice offering, and even expand it to digital platforms, so making sure that advice follows all the rules needs to be a priority.
Nevertheless, Ms Scheerlinck said a similar review of advice given by the big four banks and AMP found only a quarter of advice was fully compliant with ASIC’s rules, and that AIST was pleased with the 49 per cent achieved by super funds.
The New Daily is owned by Industry Super Holdings