It is important that super funds giving advice apply the same rules as professional financial advisers, according to Otivo founder, Paul Feeney.
In the government’s formal response to the Quality of Advice Review this week, super funds were the big winners as Minister for Financial Services, Stephen Jones, welcomed recommendations to allow super funds to give advice.
“Super funds are well suited to safely meeting the needs of their members,” Jones said.
“They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”
Speaking to Super Review, Feeney, who is founder and chief executive of the digital advice provider, said it is important the rules are not loosened for super fund advisers.
“People trust their superannuation funds to be able to look after them financially because they have a long and trusting relationship with them. Super funds know enough about their members but have been afraid to go to the next step. If you free that up then that’s great and more people can get advice,” Feeney said.
“But it should be the same rules for super funds as there are for financial advisers, they should all operate under the same regime and same process.
“You can’t make them looser about the information you have to gather or take into account, the rules need to be the same for everyone.”
He also said clarity was needed on how financial advice would be paid for and whether it would be an opt-in service for members.
Under the QAR, restrictions on collective charging would be amended to allow super funds to provide more retirement advice and information to their members. Additionally, super trustees would be provided with legal clarity around current practices for the payment of adviser service fees and accept in principle recommendation 7 around deduction of adviser fees from super.
“The government wants to expand the topics on what advice can be provided and give clarity on where that advice can be paid for,” Feeney said.
“Collecting fees from the individual member account makes most sense to me because then the other members are no longer being impacted by the administration fee going to advice. It should be an opt-in where people select to use the advice model.”
In light of this, he said super funds were looking to companies such as Otivo to provide advice in a cost-efficient way. Otivo charged an annual fee that let users use it as much as they like rather than a one-off fee.
“Digital advice should be delivered in a way that lets people experiment and people don’t want to be repeatedly charged for that, if so then you are going to be scared of playing around with it,” Feeney said.
The government’s final response to the Delivering Better Financial Outcomes package is expected to be released later in 2023.
