Hang on, help is on its way
http://www.money-tips.com.au/articles/251/1/Hang-on-help-is-on-its-way/Page1.html
Lesley Parker
Lesley is a regular writer for Sydney Morning Herald By Lesley Parker
Published on 11/27/2009
Superannuation funds have been encouraged to review what sort of financial advice they can offer.
Hang on, help is on its way
Superannuation funds have been encouraged to review what sort of financial advice they can offer.
As the sharemarket collapsed last year, many people fretted over what to do about their retirement savings - whether to ride out the storm or seek shelter in more conservative investment options, even cash.
A minority would have had access to professional advice - research shows only 20 per cent of fund members use a financial adviser - leaving the others to make important decisions without help.
Increasingly, though, superannuation funds are investigating ways of providing financial advice for members, a move encouraged by recent Government and regulator announcements on the provision of "simple" or limited advice outside the usual strict financial services licensing regime.
In July, the Australian Securities and Investments Commission (ASIC) released a guidance paper it said was aimed at allowing fund trustees to provide more information and advice to members about their existing interests in super funds.
One of the things the guidance did was clarify what constituted factual information, general advice and personal advice and under what licensing arrangements funds could legally provide each of those.
The Australian Institute of Superannuation Trustees' (AIST) chief executive, Fiona Reynolds, says the guidance "gave comfort to a lot of funds about what they can say" to members who contact them with queries.
As a result, many funds are reviewing what sort of advisory services they will provide in the future.
Some are applying for what is known as a personal advice licence, under which they'll be able to offer more detailed advice in certain, limited areas.
"These guidelines have just confirmed for a lot of funds that they could actually go further than possibly their lawyers were telling them," Reynolds says.
So what sort of information can members access through their fund?
Essentially, there are three tiers of information available. The first is factual information a fund's call centre staff or website could provide without stating an opinion or offering a recommendation. This would be provided at no cost.
An example would be information about how many investment options a fund has and how they're structured.
General advice goes a step further. Call centre staff might follow a script that says the fund typically recommends people aged between 18 and 30 invest in a high-growth option. The operator would have to point out that this advice is of a general nature only.
Then there's "personal advice". This is where the fund would have someone consider details such as age, income and account balance when talking to a member about choosing an investment option, making voluntary contributions or buying insurance within the fund.
Funds are also permitted to discuss the strict rules around early access to super if a member is experiencing financial hardship. Each fund will have its own policy about whether it charges for this.
However, under the rules on limited advice, funds can't delve into things outside the member's account, such as switching super funds, more complex retirement planning issues etc.
That isn't to say super funds can't provide full financial planning services using appropriately licensed and qualified advisers. Industry fund REST, for instance, has an arrangement where it transfers members with more complex needs to financial advice group Money Solutions, while funds such as AustralianSuper and Asset Super have arrangements with Industry Fund Financial Planning (IFFP).
The chief executive at Asset Super, John Paul, says IFFP has one of its advisers in the fund's North Sydney office take calls from members .
Insurance is another common topic of discussion - what's the right amount and how to go about getting it in place.
While Asset Super has access to fully licensed advisers, Paul says he welcomes the recent moves to loosen the rules around funds providing simple or single-issue advice in-house.
"What was a very onerous regime did prevent the great majority of consumers from getting some additional material and information in areas that touched on personal advice," he says.
REST's chief executive, Damian Hill, says his fund has provided access to financial advice since 2004. Under the rules allowing limited in-house advice, the fund averages about 55 cases a day.
AustralianSuper's general manager, marketing and communications, James Coyle, says his fund - one of the largest in the country - takes 900,000 calls a year, most of which involve general information. However it has a specialist in-house team that takes over when calls stray into the territory of limited personal advice.
KEY POINTS
Super funds can provide limited advice without being fully licensed.
They can discuss voluntary contributions and in-house insurance.
They can also discuss the fund's investment options.
Some funds now also offer access to full-service financial advice.
As the sharemarket collapsed last year, many people fretted over what to do about their retirement savings - whether to ride out the storm or seek shelter in more conservative investment options, even cash.
A minority would have had access to professional advice - research shows only 20 per cent of fund members use a financial adviser - leaving the others to make important decisions without help.
Increasingly, though, superannuation funds are investigating ways of providing financial advice for members, a move encouraged by recent Government and regulator announcements on the provision of "simple" or limited advice outside the usual strict financial services licensing regime.
In July, the Australian Securities and Investments Commission (ASIC) released a guidance paper it said was aimed at allowing fund trustees to provide more information and advice to members about their existing interests in super funds.
One of the things the guidance did was clarify what constituted factual information, general advice and personal advice and under what licensing arrangements funds could legally provide each of those.
The Australian Institute of Superannuation Trustees' (AIST) chief executive, Fiona Reynolds, says the guidance "gave comfort to a lot of funds about what they can say" to members who contact them with queries.
As a result, many funds are reviewing what sort of advisory services they will provide in the future.
Some are applying for what is known as a personal advice licence, under which they'll be able to offer more detailed advice in certain, limited areas.
"These guidelines have just confirmed for a lot of funds that they could actually go further than possibly their lawyers were telling them," Reynolds says.
So what sort of information can members access through their fund?
Essentially, there are three tiers of information available. The first is factual information a fund's call centre staff or website could provide without stating an opinion or offering a recommendation. This would be provided at no cost.
An example would be information about how many investment options a fund has and how they're structured.
General advice goes a step further. Call centre staff might follow a script that says the fund typically recommends people aged between 18 and 30 invest in a high-growth option. The operator would have to point out that this advice is of a general nature only.
Then there's "personal advice". This is where the fund would have someone consider details such as age, income and account balance when talking to a member about choosing an investment option, making voluntary contributions or buying insurance within the fund.
Funds are also permitted to discuss the strict rules around early access to super if a member is experiencing financial hardship. Each fund will have its own policy about whether it charges for this.
However, under the rules on limited advice, funds can't delve into things outside the member's account, such as switching super funds, more complex retirement planning issues etc.
That isn't to say super funds can't provide full financial planning services using appropriately licensed and qualified advisers. Industry fund REST, for instance, has an arrangement where it transfers members with more complex needs to financial advice group Money Solutions, while funds such as AustralianSuper and Asset Super have arrangements with Industry Fund Financial Planning (IFFP).
The chief executive at Asset Super, John Paul, says IFFP has one of its advisers in the fund's North Sydney office take calls from members .
Insurance is another common topic of discussion - what's the right amount and how to go about getting it in place.
While Asset Super has access to fully licensed advisers, Paul says he welcomes the recent moves to loosen the rules around funds providing simple or single-issue advice in-house.
"What was a very onerous regime did prevent the great majority of consumers from getting some additional material and information in areas that touched on personal advice," he says.
REST's chief executive, Damian Hill, says his fund has provided access to financial advice since 2004. Under the rules allowing limited in-house advice, the fund averages about 55 cases a day.
AustralianSuper's general manager, marketing and communications, James Coyle, says his fund - one of the largest in the country - takes 900,000 calls a year, most of which involve general information. However it has a specialist in-house team that takes over when calls stray into the territory of limited personal advice.
KEY POINTS
Super funds can provide limited advice without being fully licensed.
They can discuss voluntary contributions and in-house insurance.
They can also discuss the fund's investment options.
Some funds now also offer access to full-service financial advice.