Not all financial advisers are driven by earning commissions at the expense of their clients.
ONE of the main messages of industry super funds' advertising campaigns has been the demonising of financial planners. But not all financial advisers are driven by earning commissions at the expense of their clients. Australian Super has recognised this fact.
Australian Super was formed when the Australian Retirement Fund and the Superannuation Trust of Australia merged in 2006. As a sign that this marriage was blessed, the Anglican Superannuation Fund moved its members into the new fund.
Australian Super has continued to grow through other mergers and by continually trying to improve its services. It was named the 2011 superannuation fund of the year and has grown to be the largest industry fund.
The 2011 APRA super analysis report, released in February this year, says Australia's four largest super funds are, in order of size, AMP/AXA, NAB/MLC, Westpac/BT and CBA/Colonial. Australian Super is fifth with more than $43 billion in members' funds.
The size of a super fund tends to be more a reflection of past success rather than an indicator of future success. One of the best indicators is the amount of net cash flows into a fund. Australian Super was ranked No.1 in the APRA report with 2011 net cash inflows of $4.3 billion, almost twice the volume of fifth-rated AMP/AXA.
The difference between Australian Super and the other large funds is how cash inflows are generated. Australian Super does not have the large sales force and distribution system of the predominantly bank-owned funds. These retail funds disguise their sales force as advisers that in the main receive upfront and trailing commissions by signing up members for them.
Recognising that some advisers put the interests of their clients first, Australian Super in 2011 started a trial of accrediting financial planners, who had to prove their professionalism and sign a charter.
It is no coincidence that Australian Super's adviser accreditation trial coincided with the federal government's push to improve the standard of financial advice with the introduction of FOFA (Future of Financial Advice). In signing the charter an adviser agrees to:
?Work in the members' best interests.
?Be strictly fee-for-service.
?Provide an upfront schedule of fees based on the complexity of the work.
?Require members to opt in annually.
?Consent to be audited on quality and cost of advice.
Under the trial, Australian Super assessed about 250 advisers. Of that number 145 have become registered and only 75 have been accredited. Australian Super's board will decide in August whether to adopt fully the accreditation of financial planners.
The fund recognises there are other areas where services can be improved. One slated for improvement is the pension service. Australian Super realises that nearly all improvements in the past have been made to the accumulation service and it is time to focus on the pension service.
Anyone looking to get financial advice after July 1 now has a new question to ask a potential adviser: Are you an accredited planner with Australian Super?
Frequently Asked Questions about this Article…
What is Australian Super and how did it become a large industry super fund?
Australian Super was formed in 2006 when the Australian Retirement Fund and the Superannuation Trust of Australia merged, with the Anglican Superannuation Fund also moving its members into the new fund. It has since grown through further mergers and service improvements, was named 2011 superannuation fund of the year, and is now the largest industry fund with more than $43 billion in members' funds.
How does Australian Super differ from the big bank-owned retail super funds?
Unlike many bank-owned retail funds that rely heavily on a large sales force and advisers who earn upfront and trailing commissions, Australian Super generates cash inflows without that large distribution system. The fund has focused on member-driven growth and has introduced initiatives like adviser accreditation to raise professional standards.
Why are net cash inflows an important metric for everyday investors when comparing super funds?
Net cash inflows show how much new money members are putting into a fund and can be a better indicator of current momentum and member confidence than total size. For example, Australian Super ranked No.1 in the 2011 APRA report with $4.3 billion in net cash inflows, almost twice the volume of some larger retail funds.
What is Australian Super's financial planner accreditation trial and why should investors care?
In 2011 Australian Super started a trial to accredit financial planners who prove their professionalism and sign a charter. The trial assessed about 250 advisers; 145 registered and 75 were accredited. Accreditation aims to give members confidence that their planner meets agreed standards and acts in members' best interests.
What commitments do advisers make when they sign Australian Super's accreditation charter?
Advisers who sign the charter agree to work in members' best interests, operate strictly on a fee-for-service basis, provide an upfront schedule of fees based on the complexity of the work, require members to opt in annually, and consent to being audited on the quality and cost of advice.
How does the accreditation trial relate to the government's FOFA reforms?
Australian Super's adviser accreditation trial coincided with the federal government's FOFA (Future of Financial Advice) push to improve advice standards. Both the trial and FOFA aim to raise professionalism, reduce conflicted advice, and increase transparency for members seeking financial advice.
Is Australian Super focusing on any particular services to improve member outcomes?
Yes. While many past improvements focused on accumulation accounts, Australian Super has recognised the need to improve its pension service and has slated pension service enhancements as a priority area for members in retirement.
What should I ask a potential financial adviser if I'm seeking advice after July 1?
A good, direct question is: 'Are you an accredited planner with Australian Super?' Accreditation indicates the adviser has signed the fund's charter and committed to fee-for-service advice, upfront fees, annual opt-in and auditability — all points that matter to everyday investors seeking transparent, member-focused advice.
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