Intra-fund advice should be ‘simple advice only’, FAAA says

In its submission to the Australian Law Reform Commission’s (ALRC) Background Paper FSL11 – Superannuation and the Legislative Framework for Financial Services, the Financial Advice Association Australia (FAAA) has reiterated its view of intra-fund advice.

The FAAA noted while it supports the role that intra-fund advice plays in making advice more available and affordable to Australians, it stressed intra-fund advice should be “simple advice only”.

“We do not support any broadening of the intra-fund advice regime to more complex advice needs, such as retirement advice, that requires the services of a fully qualified financial adviser/planner,” the FAAA said.

In the background paper, the ALRC acknowledged that the changes proposed by the Quality of Advice Review (QAR) will potentially affect the way in which trustees provide intra-fund advice.

The ALRC explained that while the term ‘intra-fund advice’ does not have a legal definition, it is broadly considered to be “advice that is paid for through the collective fees of fund members rather than by the individual member”.

“The proposed changes in the Quality of Advice Review (such as the extension of the definition of personal advice, the removal of section 99F of the SIS Act on collective charging, the duty to give ‘good advice’, and changes to personal advice disclosure) will potentially affect the way in which trustees provide intra-fund advice,” the commission noted in the paper.

“The submission to the ALRC from the Law Council considers that it is important that intra-fund advice continue to be offered under any new reforms, and that the various types of robo-advice also need to be accounted for in this context.”

The FAAA has on multiple occasions conveyed apprehension regarding the proposed expansion of intra-fund advice.

In June, FAAA CEO Sarah Abood said the FAAA does not endorse the QAR’s specific recommendation concerning super funds in its current written form.

“We need some more guardrails, we need some more controls to ensure they meet the purpose they’re intended to,” she said, adding that guardrails could include minimal levels of education and qualifications.

She explained at the time that the primary concern FAAA members have regarding super funds expanding their role in advice pertains to the terminology that would be used to describe such advice and the potential confusion it may create among consumers.

Later that month, FAAA chair David Sharpe took the step of categorising the recommendation made by QAR reviewer Michelle Levy to increase the participation of superannuation funds in offering advice as having the potential to be harmful.

Mr Sharpe said at the time that some of Ms Levy’s recommendations almost give carte blanche access to super funds “to do what they want” in advice with unqualified employees.

“I think the minister has identified the fact that we want to make sure that there is a minimum level of education and the level of complexity that super funds can provide. Look, a really simplified analogy, what we see in medicine is that we can get simple advice not from a doctor, whether it be a physio or pharmacist, right down to even the packaging we see with our paracetamol, which has dosage instruction, but when it’s a level of complexity, we still see our doctor. I can see that playing out here,” Mr Sharpe said.

“Simple advice, go to your super fund. Anything with any material complexity, still see a qualified adviser.”

While the government’s plans for the superannuation sector remain undisclosed, Minister for Financial Services Stephen Jones has signalled his endorsement of funds playing a role in addressing the advice gap.

He elaborated in July that Australians should be able to ring up their fund and ask for advice such as whether they have enough super for retirement and how that interacts with their pension.