In a submission to Treasury about the proposed amendments to the FOFA legislation, the CSSA argued for the separation of intra-fund advice from superannuation administration fees.
“The current structure is opaque and does not best serve the interests of super fund members. The fees are determined by and paid by the product provider – employers and fund member no longer have a say,” said the submission.
The CSSA submission pointed to the 2012 Parliamentary Joint Committee report into FOFA, which recommended that corporate super specialist firms should continue to receive benefits where they represent a “reasonable fee for service” – and that Treasury should explore “alternative viable models of remuneration” for such firms.
“Treasury advised us that the intra-fund fee would be the vehicle by which corporate super advisers would be remunerated going forward under MySuper,” said the submission.
“Unfortunately, the proposed solution is unworkable, as intra-fund fees have been deemed conflicted remuneration under FOFA if paid to corporate super specialists, if the employer is assisted with default fund selection,” it said.
Because intra-fund fees are set by providers and are not determined by the amount of work required at each workplace, corporate advisers are “now effectively working for the product providers, whereas in the past the relationship was primarily with the employer and the fund members”, said the submission.
As a result, CSSA members are now left without a “workable business model”, said the submission.
The CSSA’s proposed solution to the problem is to make the intra-fund fee completely “transparent” – that is, to have it completely separated from the superannuation fund administration fee.
“We suggest that the intra-fund fee should be negotiable at the workplace level in the same way that administration fees are negotiable. A collective fee is appropriate as the work we do benefits all fund members,” said the submission.
Intra-fund fees should have a ‘dial-up’ structure, with the fee being based on the amount of work required at the individual workplace, said the CSSA.
As long as the fee that the advisory group receives is agreed upon and set – regardless of the fund that is recommended to the employer or selected by the employer – and if the fee is transparent and negotiated at the workplace level, “then it seems difficult to understand how any conflict could be perceived, or could in fact occur”, said the submission.
“If neither solution is acceptable to government, we are committed to working with the regulator to find a workable solution, as it is imperative to the efficiency of the market that we are able to advise employers as well as provide ongoing services to employees,” said the CSSA.
