Big super is fighting tooth and nail to limit the drain of money to SMSF and other 'do it yoursel' super options. Photo: Jessica Shapiro
Australia is in the grip of a ferocious battle over you and your retirement savings, with Big Super (industry and retail funds), financial advisers and the government joined in combat. To the winner go the spoils: fees on your cash.
We're told the Coalition's proposed changes threaten the very heart of Labor's FOFA (Future of Financial Advice) reforms, potentially unleashing a tidal wave of Storm Financial-style disasters.
With or without these changes, more financial disasters are guaranteed. Only in retrospect can laws prevent them. Greed, immorality and naivety – traits human beings possess in abundance – can't be legislated against. FOFA legislation (either party's version) won't stop the next disaster.
But contrary to the many news reports claiming the revisions are a huge win for recalcitrant financial planners, there's an aspect to the proposed changes that may save you thousands and vastly improve on Labor's original FOFA reforms.
Big super is fighting tooth and nail to limit the drain of money to SMSF and other "do it yourself" super options. Every dollar they don't manage is a dollar they can't charge fees on.
At the moment, that threat is limited by the cost of financial advice. Many investors simply can't afford to go through the whole "know your client" rigmarole with an adviser, let alone bear the cost of receiving useful advice, to have a simple question well answered.
So they're stuck in an industry or retail fund someone else has chosen, most likely their employer, paying for performance and service that can charitably be described as underwhelming.
One of the changes the Coalition wants to make to Labor's FOFA reforms is to alter the new "best interests" duty to make it clear a client and advisor can agree on the scope of advice.
Don't believe the fear mongering – the core best interests duty remains. The change just makes it appropriate for the circumstances.
Imagine if you couldn't get a carpenter to replace your front door unless he first undertook a complete structural integrity check of your entire house. It might be in your "best interests", but it means a $500 job becomes $5000 and very few front doors get fixed.
That's what Big Super wants from this legislation – to keep you in their handcuffs by insisting your $500 question entails thousands in fees for answers to questions you have no interest in asking.
The last thing Big Super wants is for you to be able to engage an advisor for specific advice on a specific issue at a reasonable cost. And yet this is what the proposed FOFA changes provide for.
In fact, Big Super doesn't even want you going to an adviser for an insurance or estate planning assessment, let alone to ask whether you should shift your super.
The Coalition changes to the "best interests" duty mean cheap, limited advice will now be available to investors previously unable to access it. This one change has the potential to improve the retirement outcomes of many Australians, at the expense of the profits of Big Super.
Unlike them, I'll admit to having a vested interest on this issue. I'm an investor, I run an online advice service, and I want to see ordinary investors get a better deal from the finance industry.
But change can only come at the expense of the profits of Big Super profits. That's why, with the proposed FOFA reforms attacking this river of fees, we can expect the battle to run for a while yet.
Richard Livingston is the managing director of Intelligent Investor Super Advisor, an online service providing advice on superannuation and investing. This article contains general investment advice only (under AFSL 282288).
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