The superannuation system in Australia can be dramatically improved by focusing on changes that will deliver a level playing field across all superannuation sectors, according to the Financial Planning Association of Australia (FPA).
“Consumers, and their financial planners, should be able to compare fees, product features, fund governance structures, and investment options, and know that there is a consistent regulatory framework in place,” said FPA CEO Jo-Anne Bloch.
“Too many Australian consumers are still in the dark about their ever-increasing superannuation account balances,” Ms Bloch continued. “We have not been able to get industry agreement on consistency and comparability.
“We call on the Review Panel to take this on board and specify through this consultation process the need for transparency, clarity, and comparability across key features. Consumers will be better placed to engage more fully with their providers, and better manage their super funds.”
In its submission to Phase Two of the Cooper Review, the FPA noted that regulation of the superannuation system must support the important role of financial advice.
Financial advice from a qualified financial planner helps employers and employees understand superannuation and other financial matters, to improve their retirement savings. Super fund members who seek professional advice have better asset allocation, better insurance cover, and higher contributions. They understand the benefits of long-term saving and tax concessions.
FPA research indicates that the most common financial difficulty experienced by Australians is “not understanding superannuation” (39%).
The FPA has therefore called for regulatory relief to provide advice under Intra Fund guidelines to be extended to financial planners.
“There is now widespread agreement that the law will be amended to enshrine a fiduciary responsibility on financial planners,” Ms Bloch said.
“This ‘special relationship’ must now be recognised across the board so that financial planners are afforded the same opportunity to deliver low cost advice to their superannuation clients.”
The FPA has also called on all superannuation sectors to turn their attention to the services they provide super fund members both directly and via their advisers. “The focus has been on commissions and fiduciary responsibility.” Ms Bloch said.
“Well, that battle is now over. Let’s focus on professional service and professional advice to improve super fund members’ entitlements and benefits. We urge improvements in this area so that fund members have the best opportunities to improve their circumstances.”
The FPA made a number of recommendations to the Cooper Review, focusing on choice, transparency, consistency, flexibility, and regulatory stability.
The FPA has also recommended:
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Mandatory electronic formats for processing superannuation contributions and transfers, along with appropriate timeframes;
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The use of Tax File Numbers as unique identifiers;
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Standardised fees and charges disclosure and a phase-out of exit fees;
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Regulatory relief for financial planners to provide limited advice to their clients who are also super fund members;
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Greater flexibility for super fund members to deduct advice fees, including tax deductibility of advice fees with capping of fees to ensure fairness, capped deductions from a super fund balance, and salary sacrificing of advice fees;
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No Government intervention with investment options, structure of default funds, or any other component for which trustees are ultimately responsible
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The selection of default funds should be based on transparent and comparable criteria.
Improved consistency and a greater focus on financial advice will help to ensure that consumers understand superannuation and take a greater interest in this important asset.
The Financial Planning Association of Australia (FPA) is the peak professional body for financial planning in Australia. The FPA has an office in each capital city and a network of 31 Chapters across the country, which provide a focus for business networking and professional development activities for more than 12,000 members. FPA practitioner members manage the financial affairs of more than 5 million Australians whose investments are valued at $630 billion.