When ASIC last month announced superannuation funds would now be able to offer single-issue advice to members, it started a firestorm in the financial services industry.
In one corner were the superannuation funds, relieved they could now offer simple advice to their members without putting themselves at risk of breaking the law.
And in the other corner were the financial planners and their related industry bodies, concerned this could be the death knell for the industry.
The ASIC guidance and class order were the result of a year-long study by the federal government's Financial Services Working Group and provide relief for superannuation trustees from the personal advice requirements of section 945A of the Corporations Act in limited circumstances.
"This represents a significant benefit for superannuation members who have not been able to get answers to basic questions about their retirement savings without having to pay for unnecessarily expensive advice while retaining adequate consumer protections," Financial Services, Superannuation and Corporate Law Minister Chris Bowen said.
At the time of the announcement the Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said the decision was a victory for commonsense.
"For too long, fund members have not had access to specific and simple guidance about choice within their own funds. We congratulate the government and the ASIC for taking a step in the right direction," Vamos said.
"The important benefit to the average fund member is that their fund will be better able to answer direct questions on single issues, such as their level of insurance, their investment choice, or perhaps whether they should access the government's co-contribution."
FPA chief executive Jo-Anne Bloch, however, did not greet the government's decision with a similar amount of enthusiasm.
"We condemn this decision," Bloch said.
"Giving superannuation trustees legislative relief from section 945A [of the Corporations Act] means removing the very consumer protections financial planners are required to give."
Despite the recent changes, superannuation funds have been actively looking at the possibilities for financial planning for some time, with many funds making substantial moves even before the government's announcement.
Outsourcing advice to third parties, such as Money Solutions or Industry Fund Financial Planning (IFFP), has been a cost-effective way for funds to deliver a financial planning service to members.
"It's all to do with economics and it is quite difficult to provide advice on a single issue on a case-effective basis or a fee-for-service basis as you do need scale to make the economics work," REST Superannuation chief executive Damian Hill says.
"When we looked out in the marketplace we found that there were plenty of advisers out there and plenty of advice models, but they weren't going to fulfil our needs as traditional financial planning is focused on higher income earners or those with higher savings."
Hill says the bottom 80 per cent of Australians are not serviced by the traditional financial planning industry.
"This is where most of our members lay and we wanted to fill that gap in the marketplace," he says.
REST, the industry fund for the retail sector, has offered outsourced financial planning advice to its members for about four years.
"We outsource our financial planning to Money Solutions. We found there was a need out there and we had to come up with something unique. The main unique element is the single-issue call centre as well as the option for face-to-face financial advice and web-based services," he says.
Asset Super and Tasplan engage IFFP for advice and have one embedded planner each. "If members need personal advice we encourage them towards that," Asset Super chief executive John Paul says.
First State Super also offers outsourced financial advisory services to its members, although in a different capacity to REST, Asset Super and Tasplan.
In 2009, the industry fund launched First State Super Financial Planning (FSS Financial Planning). QInvest came on board to provide the licence to operate the company.
"We were in the planning stage for some time as we'd started an allocated pension and soon realised that we were in need of advice. We started to explore what financial planning models would be best and we looked for partners because we want to provide a service fairly quickly," First State Super chief executive Michael Dwyer says.
"We looked at a lot of the players in the marketplace and Q Invest was used to working in the public sector in Queensland and offered the best services to underpin our service."
Despite outsourcing its financial planning service, First State Super has an internal team of Sydney-based planners.
"They are part of our family and work under the banner of FSS Financial Planning in terms of professional training obligations, but meeting standards and compliance issues, that's all Q Invest," Dwyer says.
The funds are reporting high levels of interest from members.
"More then 30,000 members have taken up financial advice and at the current rate we are getting 55-70 members a day phoning the call centre. This has increased over time and has been higher during times of crisis," Hill says.
Dwyer says: "A significant number of members come through the call centre, the demand is growing and Q Invest has plenty of capacity to meet this growth."
While for many funds outsourcing can meet the demands of members, for other funds, such as UniSuper, catering to the specific needs of members has meant undertaking a completely different model for its financial planning service.
According to UniSuper executive manager of financial planning Chris Davies, the fund has been providing a graduated advice model with very limited personal advice for a number of years.
"We currently have nine people who provide limited-scope advice and four paraplanners," Davies says.
UniSuper currently also has arrangements with three national planning groups - IFFP, Hillross Financial Services and Monitor Money - to refer members when their queries are more complex.
While this has suited the fund up until now, Davies says the fund trustee wants to broaden its advice offering and plans to launch an internal full financial planning capability later this year.
The in-house service will adopt a fee-for service model and will look after UniSuper members only. However, Davies has not ruled out providing planning advice for the "very close family" of UniSuper members.
According to Davies, there has been a lot of interest from members, but it is a challenging task to set up.
"It's a significant investment of time and resources to set up a full financial planning service; not too many other superannuation funds would want to embark on this," he says.
UniSuper is not a public offer fund and Davies says members have a vested interest in the full advice offering. "With UniSuper there is a strong bond with the universities, other employers and the members. The fund still offers a defined benefit category, so those members are pooling their assets and sharing the benefits of that pooled arrangement. The fund's culture is about alignment of interests in a mutual way," he says.
"UniSuper has been providing retirement outcomes for its members for many years and understands its membership very well.
"It's a slightly unusual situation in that when a member comes to see a UniSuper planner, they come to see a fellow member of the fund. While the planner is providing advice and there is a fee for service, the members know that the planners share that same UniSuper culture."
He says that at launch time the fund plans to have 20 financial planners, including those based in a call centre in Melbourne.
"We haven't finalised pricing yet, it's quite a sensitive marketing decision and we'll do it closer to the launch. But it will be highly competitive pricing," he says.
"I suppose the thing about a fund like UniSuper is that it's not for profit and our business is owned by UniSuper management and our financial planning business is therefore not for profit."
The experience of a financial planner working within the not-for-profit super fund framework can be vastly different to the retail sector.
According to Dwyer, FSS Financial Planning pays flats salaries and is not bonus driven.
"Some people might find that disappointing, but we incentivise you by paying a fair salary, which is reviewed each year," he says.
"Planners working in super funds are not driven by targets or personal gain and member satisfaction is one of the highest targets they have to reach. People who have worked in the retail industry often find that once they've worked in our environment, they want to stay in our environment."
UniSuper also plans to have a similar arrangement.
"We have employed planners, so they have a base salary with bonus arrangements. They will get job satisfaction from helping our members with sometimes quite difficult technical problems," Davies says.
According to Davies, it really depends on planner preference.
"It's an employment opportunity for senior financial planners who want to have an ongoing relationship with a client and deal with clients with complex and challenging arrangements. I think many planners would be interested in it," he says.
Superannuation fund members are asking planners for financial advice on a variety of issues.
REST has a younger demographic, so topics of interest range from super fund consolidation to insurance to co-contributions.
Recent data reveals REST members between the ages of 18 and 30 were most concerned with super fund consolidation, with the call centre receiving 1535 in 11 months about this topic.
Insurance choice was also popular with 1184 calls, but retirement planning was not high on members' priority list with only six calls.
UniSuper has a diverse membership with defined benefit members, a large accumulation-style category and many pensioners. Davies says its special area of focus is on complex, older defined benefits.
"We have very good knowledge and experience in complex superannuation matters and that is something that we can offer our membership that's very valuable. We feel that it's appropriate to give full advice to members so that they can be reassured and know that all their needs are being considered, no matter what their UniSuper benefit history and special circumstances," he says.
"In most financial planning businesses, superannuation can be more than half of the planner's focus. It's quite normal to focus on that as the core of the client's investment strategy. However, superannuation is a long-term investment so you still need to be advised on the short and medium goals, which may involve non-superannuation investment and life insurance."
For the financial planning industry this expansion of financial advice within superannuation may be cause for concern, particularly with the recent announcement of changes to the intra-fund advice model.
While Bloch is pleased by the increasing awareness of the importance of financial planning, she has expressed concern that planners working within the superannuation fund framework won't be subject to the rules adhered to by those working outside it.
"We welcome more financial planners coming in because clearly Australians are in need of financial advice, but we just ask that they comply with the same rules and regulations that other financial planners have to comply with," she says.
"Irrespective of what sort of advice you're giving and under what licence, we expect a level playing field across the entire industry because financial services reform requires strong consumer protection and we expect that that wouldn't diminish just because you happen to be a super fund, for example."
Association of Financial Advisers chief executive Richard Klipin has also weighed into the debate.
"Superannuation trustees, in particular the industry funds, have been trying for some time now to dumb down advice," Klipin says.
"But the truth is, there is a great deal of complexity in major financial decisions facing the Australian community and many people need much, much more than simplistic advice on their superannuation investment."
Bloch also has concerns the government has chosen to support superannuation trustees by enabling them to give simple advice rather than the "16,000 financial planners who are ready, willing and able to provide low-cost advice to super fund members".
The funds IFA spoke to do not see themselves as a threat to the financial planning industry, with many predicting few immediate changes to advice procedures as a result of the government's decision to allow superannuation funds to provide advice to members.
Davies says the financial planning groups to which UniSuper is currently referring members have not expressed concern about the funds' creation of an internal financial planning service.
"A couple of firms asked for information following press coverage of our plans. They understand what we're doing and they accept that this is a natural progression for our membership and that it's appropriate for us," he says.
Tasplan general manager Neil Cassidy says his fund has no plans to make immediate changes based on the announcement.
"For us it will be a wait-and-see attitude. Our situation won't change much as we engage IFFP and have one embedded planner," Cassidy says.
Paul says: "It's a little bit late as we have already invested in IFFP and I don't think the trustees would want to retreat from that. Even though the regulators have made life a little easier for the fund to be able to give some forms of restricted advice, I don't think we would want to go backwards."
However, the funds have not ruled out looking at opportunities in the future.
"We may want to change our procedure to allow people in the field to start offering simple advice, but right now we haven't made a change and I haven't contemplated bringing it forward yet," Paul says. "We have enough planners to focus on our members' needs and I don't think that's going to concern retail dealer groups or planners as it's a fairly unique segment and we have experience and special skills."
Davies says: "I think that super trustees in that they genuinely have their members' best interests at heart would believe that financial planning is a key part of delivering that outcome."
Cassidy says Tasplan may look at obtaining an Australian financial services licence.
"The general perception at the moment is that we would look at all types of scenarios and once we start getting feedback from members about what their needs and wants are, we will determine what to do next," he says.
"But we totally welcome this announcement and it should have been done ages ago. I think it will also be a wake-up call to the financial planning industry.
"They will have to be a lot more accountable about conflicts of interest than they have been in the past."
IFFP national practice manager for professional services Frank Gayton says despite superannuation funds not making immediate changes, financial planning practices will most likely be affected at some point.
"What will happen is that a lot of financial planners will find it very hard to survive financially. The number of people available for high-level advice may drop away and this will affect the viability of a number of financial planning practices," Gayton says.
"I can understand the FPA being concerned, but at the moment financial planning is one size fits all and the reality is that for many Australians they really only need single-issue advice."
Dwyer says FSS Financial Planning will provide competition to planners due to its high-quality advice for a fair fee.
"But those planners already doing that won't find us to be a threat. The business is going to expand and grow as people become more discerning during these volatile times. They can actually point to the transparent fee structure, but also see that they are getting good-quality advice which is not biased in any way as the planner won't get a profit or a bonus out of it," he says.
"There are no birthday cards at First State Super, just high-quality financial planning."
Davies says Australians are "crying out" for easily accessible and economical advice.
"I think the challenge ahead for the financial planning services provided by superannuation funds is to deliver ongoing advice, not just one-off transactional advice. Ongoing relationship-based advice is really the most valuable kind of financial planning service anybody can receive. To build a relationship with a financial planner that can be maintained up to and even during retirement is incredibly valuable to the member," he says.
