The term ‘intra-fund advice’ is not defined by law, which has meant that it is used inconsistently to refer to various types of advice in a number of circumstances. Generally, intra-fund advice refers to limited or scaled personal advice that a superannuation trustee can provide to a member about their superannuation account without an additional fee being charged to the individual member. The cost is typically covered by the collective administration fees paid by all members of the fund.
Accordingly, intra-fund advice is not a type of advice. Rather, it refers to the cross-charging mechanism, which can apply to both general and personal advice. Trustees commonly outsource the provision of intra-fund advice (sometimes to a related party), with the fund covering the costs.
Factual information vs financial product advice
It is important to put intra-fund advice in context. Not all the help superannuation funds provide members about superannuation is financial advice. When a fund’s representative gives a member factual information about a financial product, the representative does not make a recommendation, so giving factual information is not financial product advice.
Members can also seek help from their superannuation fund that involves the provision of general or personal advice about a financial product. General advice is a financial product recommendation that does not take the member’s financial objectives, situation or needs into account. On the other hand, in providing personal advice an adviser must take into account the member’s financial objectives, situation and needs . Personal advice can be limited (such as intra-fund advice) or comprehensive in scope.
ASIC is currently undertaking work on a range of issues concerning the framework for the provision of advice, including seeking input from industry about what can be done to help industry provide affordable and limited advice to consumers. The focus of ASIC’s work is on impediments within ASIC’s control. We appreciate that the superannuation industry, as well as other parts of the financial services industry, are reflecting on these issues and encourage submissions to our consultation paper on the issues, which will be released in mid November 2020.
Defining intra-fund advice
Section 99F of the Superannuation Industry (Supervision) Act 1993 (SIS Act) does not list the types of personal advice that are permissible as intra-fund advice, but it does specify the types of personal advice that cannot be cross-charged as intra-fund advice. For example, intra-fund advice cannot cover advice on whether a member should consolidate their superannuation holdings into one account.
The Government’s intention behind the law was to facilitate simple, non-ongoing advice about a member’s superannuation account. While intra-fund advice does take a member’s personal circumstances into account, the advice cannot relate to financial products outside the superannuation fund. The explanatory material that introduced the law specified that the allowable topics would include insurance arrangements in superannuation and selecting superannuation investment options.
So generally ‘intra-fund advice’ is used to refer to limited, non-ongoing personal advice accessed through a superannuation fund where the cost of the advice is charged collectively. This reflects the emphasis in the law – the ban on cross-charging certain types of advice in Section 99F relates to personal advice only and does not limit or mention general advice, and general advice is simply assumed to be cross charged.
More information about intra-fund advice is set out in ASIC’s Information Sheet 168 Giving and collectively charging for intra-fund advice.
What standard is intra-fund advice held to?
Critics have said that intra-fund advice is held to less demanding legal standards than other forms of personal advice. However, advisers giving intra-fund advice must comply with the full range of consumer protection requirements in the Corporations Act 2001 (Corporations Act). ASIC holds intra-fund advice to the same standards and stringent rules as other personal advice. Accordingly, financial advisers must act in the best interests of their client and comply with related obligations, regardless of whether they are providing intra-fund advice or other personal advice. ASIC’s Regulatory Guide 244 Giving information, general advice and scaled advice provides more information.
ASIC incorporates reviews of intra-fund advice in its surveillance activities focused on advice quality and whether personal advice complies with the requirements of the law: see for instance Report 639 Financial advice by superannuation funds. We are currently finalising our review of a sample of intra-fund advice provided earlier this year after the start of the COVID-19 pandemic.
Limitations of intra-fund advice
Many Australians don’t know how their superannuation fund can help them. Trustees offering personal intra-fund advice can help their members by clearly explaining what advice is provided at no individual cost. ASIC expects advisers providing intra-fund advice to clearly explain that the advice is limited to certain topics about the member’s superannuation. Where a member’s personal circumstances require advice beyond the scope of intra-fund advice, advisers should let them know what options they have for seeking comprehensive financial advice.
Advice providers must also exercise their judgement in appropriately scoping the advice they provide. If they cannot act in the best interests of the member due to the limitations of intra-fund advice, they should not provide the advice. Instead, they should refer the member elsewhere.
ASIC’s role in intra-fund advice
ASIC’s role is to ensure that:
- trustees use intra-fund advice appropriately for their members, taking into account the potential conflicts of interest in setting up an advice system that advises on in-house products; and
- advisers providing personal intra-fund advice meet the consumer protection requirements set out in the Corporations Act, such as the best interests duty and related obligations.
In line with ASIC’s increasing role in the regulation of superannuation and as the regulator for financial advice, ASIC is actively monitoring this area to improve advice for superannuation members.