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Tuesday 3 December 2019

19-333MR ASIC releases report on financial advice provided by superannuation funds

ASIC today released Report 639 Financial advice by superannuation funds. This report examines the ways in which superannuation funds help members obtain financial advice and the quality of personal advice obtained through the funds.

In conducting the work, ASIC surveyed 25 superannuation funds about how they help members obtain financial advice (survey) and reviewed a sample of the personal advice provided (advice review). We 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, we found that the quality of personal advice provided to members was generally appropriate.

According to responses provided by trustees of the superannuation funds:

  • 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.

To help superannuation trustees continue to improve the advice services they offer fund members, we have included a number of practical tips in REP 639 for trustees, advice licensees and advice providers.

ASIC Commissioner Danielle Press said, ‘Superannuation 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.

‘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 said.

Commissioner Press further said, ‘I know there will be general interest in whether retail or industry funds provided better quality advice. We found the quality of advice to be similar across retail and industry funds.

‘Due to the different sample sizes we used in our work however, it is not possible to properly compare the overall quality of advice based on all four fund types, and our findings are presented 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,’ Ms Press said.