Profession concerned about intra-fund advice ‘unknowns’

Speaking at Momentum Media’s Election 2025 event on Thursday, Association of Superannuation Funds of Australia (ASFA) chief executive Mary Delahunty said that with Australians retiring with more super than ever, there is a growing need for support and guidance to help them make the most of their saving once they retire.

To which she said advice is the “missing link” needed to resolve this; however, the high cost has many members locked out of accessing financial advice – the big issue the government has been attempting to tackle for at least the last three years through reforms.

Although the government’s update on the Delivering Better Financial Outcomes (DBFO) last month provided a much needed update on the progress on the reforms, there was some disappointment at the fact it only covered half of the intended changes that had been expected in the next round of reforms.

“We want to see progress, and we want to see a package delivered that works for the whole sector, for all types of superannuation funds, for financial advisers as well, and most importantly, for the millions of Australians who benefit from this uplift,” Delahunty said.

“The reforms, as presented, do present a practical way forward. We would obviously like to see the entire package and we would like to see the detail of it, but we do, as a sector, need to keep moving forward where we can agree on certain principles.

“I think that they recognise that not every member needs comprehensive financial planning, and sometimes what’s needed is simple, scoped advice about how to start an income stream or how to make a decision about retirement timing or how to understand the product.

“It’s about delivering access to advice that provides timely and relevant guidance on things like retirement income strategies without unnecessary rep tape.”

Still some major kinks in the reforms

However, Financial Advice Association Australia (FAAA) chief executive Sarah Abood also touched on this topic at the event, suggesting that there are significant issues with the intent and implications of the draft legislation.

“The challenge with collective charging of retirement advice is, in part, parsing, what do we mean by retirement advice? So, the minister has said a few times that he doesn’t intend collective charging to apply to comprehensive advice,” the FAAA CEO said.

“The legislation is to specifically allow is collective charging advice to buy a retirement product from the fund.”

On top of this, Abood suggested that the stipulation allowing super funds to take a member’s broader circumstances into account when providing retirement product advice introduces a number of issues.

“What we seem to have here, if that’s the policy intent, is investigating comprehensively the circumstances of the member, but only selling the retirement income product,” she said.

“I think that’s, I mean, that’s problematic on a couple of levels, right? This legislation scopes in the retirement income products of the fund as being included in the definition of the member’s beneficial interest in the fund, that’s changed.

“That’s something that hasn’t happened before, and typically the line has been the sale of a new financial product. So, that’s quite a major change.”

Furthermore, Abood said that the related costs and subsequent funding model of intra-fund advice have been notable sticking points for not only the association but also the members that would be taking on the cost of these services, regardless of whether or not they ever use it.

“I think collective charging is problematic because the advice to do that and to do it safely is more expensive than the intra-fund advice where the information collection aspect is generally quite straightforward,” Abood said.

“They’re quite simple, they’re not hugely expensive, and there isn’t a lot of opposition to the existing intra-fund advice framework that’s used in super funds. There will be a lot more opposition to this, in part because it’s a lot more expensive.

“So, the concern that members have expressed to me is that we haven’t tried to get the cost of providing advice down. We’ve just spread it across small people.”

One notable exclusion from the draft legislation was the so-called new class of adviser (NCA), however, with the introduction of intra-fund advice, Abood said it is unclear if the government intends for the NCAs to be the ones providing said advice.

“That, again, is strongly opposed by our members, because there’s not a view that’s broadly held in our sector that that advice can be simple, because when you’re starting to understand the retirement needs of a consumer, you have to take into account all these other circumstances,” she said.

“There is so much more to it than simply the sale of a retirement product. That has generated a lot of concerns for members because the people that provide that advice, in so far as they are the new class, will not have the training, will not have the individual ethical obligations or experience that professional advisers do.”

Associations must work together

The various industry associations have been at odds on some aspects of the reforms from the outset, a natural occurrence as their members’ needs and interests are often misaligned.

However, the ASFA CEO said there are key principles, including the need to expand access to financial advice, on which they are aligned and as such there is a path forward.

“This is not going to be an easy navigation. Landing this advice reform is going to be difficult for the sector,” Delahunty said.

“We all agree with the associations and in the sectors on the principles of where we are going. We have some fundamental challenges with the way in which we get there but I always think when you can find agreement on the principle that there is always a path forward, and so it is our job to find that path forward and I certainly acknowledge the work of the FAAA and FSC in that area.

“I think we all want to see more Australians access the advice that they need via professionals who are appropriately trained, working within clear boundaries and delivering advice that remains in the member’s best interest.

“We are committed to ensuring that the advice reforms work for advisers, for funds, and, most importantly, for members, and we want an incoming government that will be laser focused on that.”

Despite the challenges, Delahunty said the reforms are at least on the “right pathway” and represent what ASFA members want, though it is hard to say whether the package, as a whole, strikes the necessary balance for all impacted parties.