With A Little Help From The Super Fund
Sydney Morning Herald
Saturday November 15, 2008
The investments watchdog clears the air on providing limited financial advice to members. Simon Hoyle reports.
If you wanted a little advice on the best thing to do with your super - just your super, not on every aspect of your finances - until recently it was not clear where you could go for help. The most obvious place to turn - your super fund - may in fact be the place least able to give you the help you need. You end up phoning a fund's call centre, where you are told they cannot help, or they refer you to a "full-service" financial planner - and this can be a bit like going to see a world-leading surgeon when all you have got is a paper cut. However, an increasing number of funds are realising that what's happening on global financial markets at the moment means members have suffered something a lot worse than a paper cut and run the very real risk of making unwise decisions driven more by fear or ignorance than a sound understanding of investment issues.(However, members' understanding of general superannuation issues seems to be improving - see panel, far right.)Some advice and guidance from funds would not be a bad thing. And while radical surgery is not necessarily called for, something more than a Band-Aid could be. Last week the corporate regulator, the Australian Securities and Investments Commission, acted to make it easier for all superannuation funds to give help to members. Previously, super funds often found it difficult to provide even simple advice to members. The rules and regulations governing the provision of financial advice meant it was unclear how far funds could go. Further full-service financial planning could be cumbersome, expensive and ultimately akin to using a sledgehammer to crack a walnut. The response by some funds was often to do nothing and to leave it up to members to seek advice from whatever source. Some funds already offer advice to members. Some have set up in-house financial planning (such as First State Super, as reported in the Herald last week) and others have established relationships with existing financial planning firms, to whom the funds refer members who need help. But all funds have grappled with the issue of what is called "implied advice", and whether it is appropriate for the funds' call centre staff - who are usually not qualified advisers - to give such advice. Implied advice can be given in even a very low-level conversation between a fund member and a call centre. Some funds believe giving such advice is OK; others believe the law is sufficiently grey to steer clear of it altogether. Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia, says the watchdog's action clears up any confusion: any fund that applies for relief from ASIC can now provide limited advice to members via call centres.Following a request from Vamos's group, ASIC issued a "no-action" letter to super funds, which it defines as one in which "we state to a particular person that we do not intend to take regulatory action over a particular state of affairs or particular conduct"."A no-action letter is used to provide comfort and some level of certainty to an applicant on the basis that we do not currently foresee that we will take other regulatory action in relation to the conduct," the commission says."A no-action letter is an expression of regulatory intent and is not a form of legal advice. It is specific to a particular set of circumstances and does not have precedent value."A no-action letter does not restrict our right to take action in the future and may be withdrawn at any time. It is not intended to affect the rights of third parties to take action."ASIC considers the current global financial turmoil serious enough to allow super funds to do something that they are usually not allowed to do.The Financial Planning Association of Australia, says chief executive Jo-Anne Bloch, "supported the move to provide temporary relief, on the basis that it was temporary"."And we would also prefer [the advice] was provided by people who are at least RG146-compliant [holding the minimum qualification necessary to give financial product advice], although we understand that the circumstances at the moment make it difficult."Bloch says ASIC's move highlights the difficulties under which financial planners and super funds alike have operated. "Providing limited advice is almost impossible in the current environment," she says, "and that's why this intervention was necessary. "We expect financial planners should be able to take advantage of the fact that they are already licensed and therefore able to provide this sort of information." Vamos says super funds that already offer full-service financial advice will not be affected by ASIC's latest move. "But if they do have a call centre, then often what happens in these arrangements is that they start talking to a member and very early [in the conversation] they may say, 'I'll give you to a financial planner.'"This allows, when you have a call centre person and a member who has rung in and said, 'Look, I'm thinking of changing my investments from equities to cash' - and there's a lot of people inquiring about that, because they want the certainty of the Government guarantee - this will allow the [call centre] to say to them, 'Do you realise that if you redeem now you'll be crystallising losses; that you'll get the worst possible value for your assets because the market is down? The market will come back - it may take time, but it will come back - and you may miss that; and you need to think about what you're doing and you need to get advice.' " Vamos stresses ASIC's move does not allow call centre staff to give proper or full advice but merely allows them to raise the issues that members should think about before making a decision. Raising the issues constitutes implied advice (it may temporarily cause a member to reconsider or to delay a decision), and the ASIC action clears up any confusion over whether it is OK for funds to do this."It's about giving people enough information so they stop and think," Vamos says. "Implied advice is a grey area. A lot of funds do that. They say the law allows them to do that. And if you have got a person [in a call centre] who is not highly trained, to cross that line is relatively easy." Vamos says call centres will not have to train staff as advisers or financial planners."They'll be using scripts," Vamos says. "This is the question that's asked; this is the script. A lot of this information is already in [a fund's] product disclosure statement. This is general guidance - very limited advice about consequences or potential consequences."Vamos said ASIC's move was "not about suddenly allowing unlicensed superannuation trustees to provide financial advice or about providing recommendations". "It is about being able to provide reasonable assistance to fund members at this time," she said. "The line between guidance and personal financial advice is a difficult one. The relief given by ASIC aims to address what often falls within the grey area between general information and personal advice. "ASFA sees 'implied personal advice' as a major stumbling block to the provision of helpful guidance to fund members in the current environment." Vamos said that super fund trustees must "notify ASIC in writing that they are availing themselves of the 'no action' position". "It is important to remember that ASIC is taking this position in the interests of fund members, and that fund trustees must comply with the specific conditions set down by ASIC to qualify for the temporary relief," she said. Vamos told the Herald that super funds have already made several submissions to the Financial Services Working Group on the issue of implied advice. The current arrangement is an opportunity for funds and the regulator to test-drive how a more relaxed and certain regime might work."It would be nice to see [the current arrangement] last until then," Vamos says."This is a good chance for the industry to test a number of issues around limited advice that have been the subject of submissions."
© 2008 Sydney Morning Herald
