Advice from super funds meet ASIC approval

ASIC’s Report 639 examined the ways in which superannuation funds help members obtain financial advice through a survey, and the quality of personal advice obtained through the funds through an advice review.

The report surveyed 25 superannuation funds about how they help members obtain financial advice, and reviewed a sample of the personal advice provided.

It looked at a cross-section of the Australian superannuation industry and surveyed 11 retail funds, 10 industry funds, two corporate funds and two public sector funds.

Overall, ASIC found that the quality of personal advice provided to members was generally appropriate.

How super funds provide advice

According to responses provided by trustees of the superannuation funds, ASIC noted that:

• the most popular advice topics sought by members were member investment choice, contributions and retirement planning;
• general advice made up 75 per cent of advice accessed by members from the funds;
• four of the 25 funds surveyed did not offer personal advice to members;
• across all the funds that offer advice services to members, the most common delivery channels for providing advice to members were in‑house call centres and advice providers employed by a related party;
• across all funds, the key conflicts of interest identified by trustees were vertical integration, relationships with third-party advice providers, and bonuses paid to advice providers; and
• the majority of superannuation funds intend to increase their use of digital tools in the coming year.

The quality of advice from super funds

ASIC looked at the quality of advice being provided to members of 21 of the 25 funds. The other four funds were not included because they responded that they did not provide personal advice to members.

The review aimed to test whether advice providers complied with the best interests duty and related obligations when giving advice to members. In some of the cases, the fund was not the advice provider.

Overall, ASIC found that:

• 49 per cent of the files demonstrated full compliance with the best interests duty and related obligations;
• 36 per cent of the files did not demonstrate full compliance with the best interests duty and related obligations, but the file did not indicate that the member was at risk of suffering financial or non-financial detriment as a result of following the advice provided; and
• 15 per cent of the files did not comply with the best interests duty and related obligations and there was an indication that the member was at risk of suffering financial or non-financial detriment as a result of following the advice provided.

According to ASIC, the main reasons for files not complying with the best interests duty and related obligations were:

• the advice provider failed to identify the subject matter of the advice and the member’s objectives, financial situation and needs; and
• the advice provider failed to conduct a reasonable investigation into financial products and base all judgements on the member’s relevant circumstances.

‘It’s pleasing to see’, says ASIC commissioner

ASIC commissioner Danielle Press said super funds have a very important role to play in meeting the financial advice needs of members wanting to build their retirement income.

“It was pleasing to see that the personal advice reviewed was generally appropriate for members,” Ms Press said.

“We recognise that inappropriate superannuation advice can have a significant detrimental impact on members’ future financial security. Where we did see some risk of detriment, we 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 further acknowledged there would be general interest in whether retail or industry funds provided better quality advice. The report found that the quality of advice to be similar across retail and industry funds.

However, due to the different sample sizes we used in its work, Ms Press said it is not possible to properly compare the overall quality of advice based on all fund types, and had to present its findings on an aggregate basis.

“We will continue to monitor developments in advice services offered by funds through our regular engagement with trustees and take action as required,” she said.

The super funds that took part in the ASIC report were:

Industry funds

Australian Meat Industry Superannuation

AustralianSuper

Equipsuper

First Super

Employees Superannuation

LUCRF

Statewide Superannuation

SunSuper

UniSuper

United Super

Retail funds

Avanteos Investments Limited as trustee for the Avanteos Superannuation Trust

Challenger Retirement and Investment Services

Equity Trustees Superannuation

Fiducian Portfolio Services

IOOF Investment Management Limited as trustee for the IOOF Portfolio Services Super

Mercer Superannuation (Australia)

Nulis Nominees (Australia)

Perpetual Superannuation

Suncorp Portfolio Services

Tidswell Financial Services Ltd as trustee for the Tidswell Master Superannuation Plan

Zurich Australian Superannuation

Public Sector funds

FSS Trustee Corporation

VicSuper

Corporate funds

Qantas Superannuation

Telstra Super