Calls for end to intra-fund advice ‘uncertainty’

In its submission to the government’s consultation around the retirement income covenant, TAL said it was “vital that regulatory support is provided to the expansion of the intra-fund advice regime” alongside the commencement of the covenant, and that this should not be delayed until after the Quality of Advice review, currently slated for 2022.

The comments come after similar calls from the Australian Institute of Super Trustees, with the industry body recommending the government bring forward its advice review with a view to extending the intra-fund advice regime before the covenant legislation is passed.

Off the back of Westpac being fined $10.5 million this week for breaches of personal advice laws by its call centre staff relating to just 14 fund members, TAL pointed out that trustees were understandably nervous of giving any guidance to members around retirement strategy that could breach the line between general and personal advice.

“TAL notes that the [government’s] position paper positions retirement guidance as being a continuum, ranging from factual information through to personal financial advice. Parts of this continuum are currently subject to policy uncertainty plus challenge in the context of recent case law,” the submission said.

“Given the nuanced line between factual information and advice (general and personal) and legal risk arising from the possibility of crossing the line between what constitutes ‘personal’, as opposed to ‘general’ financial product advice, trustees are likely to approach the provision of guidance with considerable trepidation.” 

The insurer noted that the current intra-fund advice framework was “highly limited in scope” and needed “some basic extensions”, including allowing funds to “guide and support members” on assets and income outside super to the extent they impacted pension eligibility, and also on the entire income needs of a household rather than an individual member.

“This approach would have dual benefits of helping funds better guide members to make effective decisions around their retirement plan, while also supporting the uptake of retirement income streams,” the submission stated.

Off the back of this potential expansion, TAL said it was worth considering whether trustees could charge members individually for intra-fund advice as they accessed it, rather than charging all members collectively.

“In the case of... costs borne by members individually, advice or guidance relating to the retirement income strategy of a household should be permitted to be funded from a single member account,” the insurer said.