Douglas Latto

The Corporate Super Specialist Alliance (CSSA) disputes that making any MySuper fund a default fund will result in unnecessary costs and expensive red tape.

“We actually think the opposite is true,” says CSSA President Douglas Latto. “If any MySuper fund can be a default fund then most employers will not be forced onto the market in search of a new provider; they will elect to stay with their current fund. This means there would be no employer search costs and no red tape.”

Mr Latto says that at the moment some funds are under multiple Awards and each Award has a different default fund requirement. “This means employers may currently be paying to a number of different funds because the Award forces them to have different defaults for different groups of employees,” he says. “If any MySuper fund could be a default fund, employers could consolidate into the preferred fund amongst the funds they are contributing to. This would reduce time and red tape for the employer because they would then only have to choose one fund for their whole company.”

The CSSA also believes that it is not appropriate for the Fair Work Commission to be responsible for selecting default super funds for inclusion in industrial awards.

“With the greatest respect, we do not think the Fair Work Commission has the expertise or experience to do this kind of work. We are giving responsibility for millions of dollars of consumer retirement savings to people who have no expertise in choosing funds,” he says. “CSSA advisers take years to hone their skills, to make their selections and to understand how products work.”

Mr Latto also said that under the new MySuper rules only registered organisations can submit on modern awards and this presents a conflict of interest.

“Registered organisations are bodies like unions and employer groups,” he says. “When these organisations make their submissions they are highly likely to support their own funds. If any MySuper fund could be a default fund, this conflict of interest would cease to exist.”

Allowing any MySuper fund to be a default fund would also see the return of a fair market and a level playing field, he says.

“We utterly reject the concept of a ‘quality filter’ which narrows the universe of default funds down to a mere handful,” he says. “If the marketplace is reduced to just a few funds, people are forced to go into them. This is not only uncompetitive but also completely removes innovation from the marketplace because there is simply be no need to innovate.”

The post CSSA rejects MySuper red tape claim appeared first on AdviserVoice.

Employer financial services need to remain under FoFA: CSSA

The Corporate Super Specialist Alliance (CSSA) is seeking a Future of Financial Advice (FoFA) regulation so that employers and fund members can continue to receive the financial services they need in relation to their company super funds.

CSSA President, Douglas Latto said employers and policy committees need to ensure their members receive competitive benefits and features at a competitive price.  “Fund members need access to general advice and information to help them improve their life insurance decisions and retirement savings outcomes,” he said. “Corporate super specialists have a long history of providing these very important services and we need to make sure we can continue to deliver them.”

Mr Latto said that faced with the obligation to choose an alternative superannuation fund in order to comply with MySuper, employers now need access to low-cost financial advisory services more than ever. “Once MySuper starts, thousands of companies will be looking for advice to help them select a default fund for their employees,” he said.

The CSSA made submissions to both Treasury and to the former Ministers for Financial Services and Superannuation seeking this regulation to enable the ongoing provision of services to employers. No decision was received prior to the Federal election.

“We put forward a solution which we believe is in the best interests of corporate super fund clients and, with a change of Government, we are now urging Treasury and the incoming Assistant Treasurer Arthur Sinodinos to consider our recommendations,” Mr Latto said.

Mr Latto also said that without a regulatory solution, corporate super specialists will have to stop providing their services to employers and corporate super fund members. “This would have devastating consequences for the funds which now enjoy a range of services at the employer level; at the policy committee/representative body level; at the individual super fund member level and at the collective member level,” he said.

Mr Latto said a regulatory solution is necessary following the decision to decline the CSSA’s request for a No Action Letter from the Australian Securities and Investments (ASIC).

“Advisers have been placed in a position where it is impossible for them to avoid breaching the conflicted remuneration provisions if they provide services to both employers and employees and this needs to be resolved in the best interests of all fund members,” he said.

The post CSSA Renews Calls on Treasury to Preserve Corporate Super Services for Employers and Fund Members appeared first on AdviserVoice.

Employees may have some benefits cut.

Employers may be forced to reduce the benefits they provide for their employees as a result of Stronger Super legislation, as certain super funds change their structure to comply with the new rules.

Gareth Hall, Treasurer of the Corporate Super Specialist Alliance (CSSA) said that the CSSA was aware that certain superannuation funds were in the process of removing the ability for employers to pay administration fees and insurance premiums on behalf of their staff.

“It seems that some funds are using the MySuper compliance rules as an excuse to withdraw their employer sponsored fund offering; simplifying their service to now only deal directly with the individual fund members,” Mr Hall said. “This can have a detrimental effect on employee’s retirement savings.”

The result being that workers, who have previously had their fees paid by their employer, are now paying all these fees themselves, out of their own superannuation monies.

“The changes seem to result from the funds’ interpretation of MySuper guidelines, which insist that MySuper products provide the ‘same offering for all members’,” Mr Hall said.

This is a direct consequence of the Stronger Super regulations that were supposed to provide simplification and a reduction in fees.

“This loss of additional benefits may, in some cases, cost members more than the recent increase in Superannuation Guarantee (SG) payments (from 9% to 9.25%). The lower contribution limits have also slashed the ability of employers to provide more generous contributions for staff.”

Mr Hall said, “These restrictions may force employers who have previously been providing superannuation benefits in excess of the legislated minimums to either stop making these additional payments or to pay them as taxable salary.”

Employers and their employees should be aware of the finer points of the Federal Labor Government’s legislation, including some outcomes which are not necessarily in everyone’s best interest.

The post MySuper bites into employee benefits appeared first on AdviserVoice.

In their submission, CSSA President Douglas Latto says the new selection process would introduce three layers of bureaucracy and therefore three layers of costs.

“For a fund to make it through to a Modern Award, an application to APRA to become a MySuper Fund would first have to be made,” he said. “It would then fall to the Default Selection Panel (DSP) to select which MySuper Funds make it through to each Modern Award. Finally, the Bench of Fair Work Australia (FWA) would vet the selections from the DSP. The amount of time and cost involved in this process is considerable.”

Mr Latto said the CSSA also objects to the new process on the grounds that it will distort the market.

“If a fund does not appear in enough Modern Awards it will be unlikely to survive because it cannot be chosen as a default super fund,” he said. “Major funds may be forced to close.  We believe such interference in the market is a step too far for any government.”

The CSSA also questioned how the DSP can choose default super funds when there is no investment history.  “Many funds will be choosing new investment strategies for their MySuper so comparisons will be difficult if not impossible,” Mr Latto said.  “The temptation will be to select funds purely on fee cost and not on value.”

He also said a review period of four or even eight years may have a negative impact on members.  “Funds that are on the list will wish to remain on the list and will be tempted to make inappropriately short term investment decisions,” Mr Latto said. “This could negatively impact investors in superannuation which is, by its nature, a long term investment.”

Mr Latto said the CSSA also has serious concerns about the removal of grandfathering from Modern Awards.

“If a fund, chosen by an employer as a default fund in the past, is not selected as a MySuper Fund going forward, employees, who have had a long relationship with that fund, will be forced to move out of it – whether they like it or not,” he said. “These are funds which have been tailored to meet the specific needs of the employees in their own individual workplaces.”

Mr Latto said the risks of forcing hundreds of thousands of members to move to alternate MySuper funds include:
• Auto acceptance into group life insurance options may disappear, leaving members underinsured. This is particularly problematic for members with pre-existing conditions who are ‘uninsurable’ elsewhere
• Those with life insurance in their existing super fund may end up with reduced cover on transfer to a MySuper fund
• The cost of transferring member funds into MySuper funds will run into the multi-millions, a cost which must surely be ultimately borne by the members
• The proactive financial literacy programs that corporate super fund advice specialists currently provide to corporate super fund members may no longer be available

“Forcing large numbers of employers to undertake this exercise and move away from current carefully selected solutions, that have been tailored for their workplace, does not make sense,” Mr Latto said.

The best solution, according to the CSSA, is for any MySuper fund to be a default super fund.

“If an award limits the choice employers have for their default fund, it reduces their ability to provide the best outcome for their employees,” Mr Latto said. “This is clearly anticompetitive and not in anyone’s best interest, other than the fund nominated in the award. If a product is superior, market forces will attract advisers and investors to it.”

The post MySuper: Default super selection a step too far appeared first on AdviserVoice.

The Productivity Commission put forward four options as alternatives to reform the process for the selection and ongoing assessment of superannuation funds for listing as default funds in modern awards.

CSSA President, Douglas Latto said the Law Council of Australia, the Financial Services Council (FSC) and the Transport Industry Superannuation (TIS) Fund have all recently indicated support for the CSSA’s preferred option – Option 1.

Option 1 involves each employer choosing a fund from all of those that offer a MySuper or other approved default product. If the MySuper legislation passes into law and all default superannuation funds must be MySuper funds, then there will be no need to nominate default funds in awards as any MySuper fund would in fact be a default fund.

 “While Option 1 has always been our preferred option, we understood it had been ruled out because the Productivity Commission formed a view that it was too confusing for employers,” Mr Latto said. “However, arguments put forward by the FSC, the Law Council’s Superannuation Committee, and the TIS Fund confirm our view that it makes the best sense.”

In its Supplementary Submission to the Productivity Commission, the FSC preferred Option 1 on the grounds that, “it eliminates the need for any Fair Work Australia (FWA) or other process for listing or delisting funds as every MySuper product would be an eligible default fund at the workplace level.”

The FSC went on to say in its submission that, “Option 1 creates the most competitive market which is in the best interests of consumers/members according to OECD principles.”

The TIS Fund also supports the allowance of all MySuper Funds as Default Super options, saying in its submission to the Productivity Commission that: “… there is no net benefit to designing criteria over and above this, or requiring extra supervision by Fair Work Australia, when MySuper Fund options meet specific criteria already and provide a simple solution.”

The Law Council’s Superannuation Committee went one step further and was recently reported as saying that Options 3 and 4 could in fact lead to worker legal action against the Commonwealth and in a submission to the Productivity Commission suggested Option 1.

Mr Latto dismissed an argument put forward by the Industry Super Network (ISN) that there are too many superannuation funds available to consumers.

“The Productivity Review identified 220 funds,” he said. “Letting employers choose a superannuation fund for their employees helps ensure that it can be specifically tailored to meet the needs of their workplace.”

Mr Latto also said that in holding the returns on industry funds up as shining examples, the ISN is implying that past performance is a good indication of future returns.

“This defies current financial investment logic,” Mr Latto said. “The global financial investment community constantly reminds us that in fact past performance is no guarantee of future returns.”

The post CSSA supports industry preference for default super option appeared first on AdviserVoice.

In the CSSA’s response this week to the Interim Report of the Productivity Commission Inquiry into Default Superannuation Funds released late last month, CSSA Treasurer Gareth Hall congratulated the Productivity Commission (the commission) for recognising the need for reform in the default superannuation environment.

“It is excellent that the commission realises that the process for the selection and ongoing assessment of superannuation funds for listing as default funds in modern awards needs to be reformed,” he said.

“The Productivity Commission’s desire is to make the process open, contestable and transparent; as this is not currently the case.”

Mr Hall said that in particular the recommendation that, under any circumstance, employers would be able to choose a fund not listed in an award, is quite a breakthrough.

“We feel it is very important to allow employers to be able to tailor their superannuation offering to suit their employees, as the roles of employees that are employed under a particular award can be very diverse,” he said.

However, Mr Hall said the CSSA is concerned about the onus put onto employers to prove that their employees are no worse off.

“We believe that this requirement of proof needs to be carefully quantified so that an employer is aware that they have met the criteria required at the time a fund is selected,” he said, “as if this is not the case this would provide a significant disincentive for an employer to make a selection outside the funds nominated in an award.”

The commission put forward four options as alternatives to reform the selection process, however the CSSA’s preferred option, Option 1, has been ruled out because the commission believes it may be too confusing for employers.

Option 1 involves each employer choosing a fund from all of those that offer a MySuper or other approved default product.

“If MySuper legislation is passed into law and all default superannuation funds must be MySuper funds, then it is very clear to us that there will be no need to nominate default funds in awards as any MySuper fund would, by design, be suitable as a default fund,” Mr Hall said.

“If Option 1 is ruled out, then the CSSA would suggest that the only other viable option is Option 4.”

The CSSA does not support Option 2, which represents a minimal change, where the industrial parties assess all potential funds and nominate a subset of five to 10 funds to FWA for listing in awards.

Option 3 represents a more significant change to the current industrial process, with decisions being made by a Fair Work Australia (FWA) panel — comprising full-time members and part-time experts — and the selection process being opened up to allow all funds to present their case to FWA to be listed in modern awards.

Option 4 is similar to Option 3, but decisions would be made by a new expert body independent of FWA, with FWA playing a minimal role in administering the decision.

“We do not consider Option 3 as viable, as we do not believe FWA has the specific knowledge and the necessary experience of superannuation to be in the position to make decisions as to which funds should be allowed as default funds in modern awards,” Mr Hall said.

“We understand that FWA has been subject to some significant level of criticism in their handling of recent enquiries. Their impartiality has been brought to question and they have taken a long time to come to a conclusion, which would lead us to question if they have the necessary resources to take on this role.

“It therefore seems logical that a new expert body independent of FWA would be best positioned to make decisions on superannuation in Modern Awards.”

2 August 2012 

The post CSSA: common sense approach to default super welcome appeared first on AdviserVoice.

Mr Ripoll was reported yesterday as saying he hoped the introduction of Future of Financial Advice (FoFA) legislation would lead to more people taking a greater interest in their retirement savings and investments.

Unfortunately, MySuper runs counter to that objective.

CSSA President, Douglas Latto, said under measures to be introduced via MySuper, corporate super specialists, who currently provide proactive financial education services to millions of employees via their corporate super funds in the workplace, will not be able to be effectively remunerated.

“If that happens, corporate super specialists will obviously have to withdraw their proactive financial services from the workplace,” he said. “What will that mean? It will mean more Australians will lose, rather than gain, interest in their retirement savings.”

CSSA advisers provide a range of services to employees, including:

• Conducting financial literacy and education seminars, personal on-site meetings and distributing newsletters in the work place
• Negotiating better terms and conditions with super funds
• Monitoring the super fund on a continuous basis, correcting the many errors that occur and overcoming administrative issues
• Playing a member advocacy role in negotiating lower fees
• Helping the fund with its group risk requirements; negotiating better features and lower life insurance premiums for members and helping members with life insurance claims.

“We believe it is highly unlikely that product providers in the space will adopt our proactive approach to financial literacy,” Mr Latto said, “which will ultimately compound the problem.”

A survey across CSSA membership reveals the current cost of providing financial services to corporate superannuation funds is about $1per member, per week.

Mr Latto said that research conducted by CoreData on behalf of the Association of Financial Advisers (AFA) earlier this year reveals that the services provided by CSSA advisers are very highly valued by the majority of employees.

“The research also confirmed our belief that if our services were not available, many employees would not actively seek out financial services education and advice,” he said. “It really doesn’t make sense to introduce measures which will remove consumer access to our services.”

The post MySuper negates Ripoll’s consumer engagement ambitions appeared first on AdviserVoice.

The request was put to the Government in the CSSA’s submission responding to the Exposure Draft Superannuation Legislation Amendment (MySuper Care Provision) Bill 2011.

“Corporate super specialists currently provide a range of highly valued insurance services to members of corporate super funds, including things like negotiating reduced premiums and better features, ensuring members are not subject to automatic acceptance levels and helping them navigate the maze of paperwork that accompanies claims,” said CSSA President, Douglas Latto. 

“While the CSSA recognises that it is inappropriate for commissions to be included in a premium when no service is being delivered, if corporate super specialists cannot be effectively remunerated, members of corporate super funds would ultimately lose their services.”

Under the Future of Financial Advice (FoFA), Tranche 2, commissions on insurance within superannuation will only be allowable on choice funds and products; group insurance is excluded.

“We suggest that an explicit insurance service fee, which defaults to zero, be charged to all members at an agreed percentage with the consent of the employer,” Mr Latto said. “This is specifically relevant when a tailored default insurance strategy is selected by an employer – rather than the standard default strategy.”

Mr Latto said the insurance service fee could operate within group insurance in the same way that asset-based fees operate within investment and superannuation. “This should ensure that only those receiving insurance services are paying the fee,” he said.

Mr Latto argued that ultimately group insurance is a better solution for members, offering lower costs and more tailored features than a series of individual contracts. “It makes no sense that payment for providing services associated with insurance to members can only be made from the least efficient solution,” he said.

The post CSSA calls for insurance service fee for group insurance appeared first on AdviserVoice.

“The volatility is a powerful and timely demonstration of what millions of Australian workers stand to lose if the Government’s plan to ban commissions on group risk and introduce opt-in goes ahead,” said President of the CSSA, Douglas Latto.

The CSSA believes the Government also intends to prohibit fees being paid to corporate super specialists on a collective basis – such as a dollar cost for each member.

“Currently, collective fees are agreed between employers and advisers and apply equally across all members,” Mr Latto said. “We believe that in the future only individual members will be able to agree to such fees. What this will mean in practice is that if opt-in is introduced, advisers will have to collect the signatures of hundreds of thousands of employees every two years – an impracticable and we believe ultimately impossible task.”

Mr Latto said that alternative remuneration solutions being put forward by some sectors of the industry do not stand up.

“One suggestion has been to introduce a user-pays system, whereby people only pay for pieces of advice,” Mr Latto said. “This has been trialled by some segments of the industry and we know from those experiences that it doesn’t work because it is reactive, not proactive.  The way the system works at the moment allows everyone to share the cost so that services can be delivered to all members at all times. Members always have the option to opt-out through fund choice.”

On the commissions’ issue, the Minister for Financial Services and Superannuation, Bill Shorten recently announced that although the Government was considering changing its stance on banning commissions on life insurance within superannuation for individually advised insurance, he did not see the case for commissions on insurance through default or group policies.

“Minister Shorten’s statement assumes – wrongly, in our opinion – that group risk is unadvised. In fact, corporate specialists provide a range of ongoing advice services which are available to all members of the corporate super plan at all times.”

Mr Latto said these services include; providing ongoing reviews, continually monitoring the insurer for accurate data (particularly where sums insured are linked to salary), assisting in the underwriting requirements of new members, answering member questions, conducting seminars and being there for members at claim time.

Mr Latto warned that if corporate super specialists cannot be fairly rewarded for their services then those services will have to be withdrawn and ordinary Australians will lose access to experienced financial advice professionals.

“The only recourse for employees in this scenario will be to seek help from call centre operators with no runs on the board.”

Mr Latto also said that in today’s workplace, people need pro-active advice delivery. “Our members are out in the workplace at this very moment – asking corporates what they would like us to do for their members. That’s where they’ve been every minute of the day, even before markets began tumbling.

“Our aim is to make sure companies and their employees get the information they need and are looked after properly.  We are there for people when they need us, helping them to make logical decisions.”

The post CSSA: Market volatility highlights risks to ordinary workers appeared first on AdviserVoice.

The Minister for Financial Services and Superannuation, Bill Shorten yesterday announced the Government was considering changing its stance on banning commissions on life insurance within superannuation – but only for individually advised insurance. He said he did not see the case for commission on insurance through default or group policies.

President of the CSSA, Douglas Latto, said the Government should not be making a distinction between individual and group risk, but between advised and unadvised insurance.

“There is an assumption that all group insurance is unadvised,” Mr Latto said. “In fact, a lot of group insurance is advised. The distinction that should be made is not between group insurance and personal insurance but between advised insurance and non-advised insurance; that is the more important distinction.”

Mr Latto said the advice and services provided by advisers to members of corporate super plans include:

• Negotiating with the insurer for reduced premiums and better features (such as higher levels of automatic cover, thus requiring less evidence of health from members)
• Ensuring members receive their full formula entitlement and are not restricted to automatic acceptance levels
• Assisting members with their claims.

“These are the active services that we are paid, via commissions, to provide to employees,” Mr Latto said. “We’re constantly reviewing things like premium costs, automatic acceptance levels and policy features; keeping a briefing eye on it on an on-going basis.  Everyone in the fund benefits continually from that.”

Mr Latto said he was concerned that, if commissions are banned, advisers could no longer service corporate super fund members.  “If that happens, who advocates for these ordinary working mums and dads and acts on their behalf at claims time? They can’t do it themselves; it is not the role of their employers and it is not in the best interests of insurers.”

The CSSA is proposing a new commission model for group insurance whereby the level of ongoing commission defaults to zero.  Upfront commissions on group insurances have never been paid.  Ongoing commission can then be paid at an agreed level with each employer.

“This ensures that employees continue to enjoy ongoing access to pro-active insurance advice and that advisers can afford to service them,” Mr Latto said.

The post Millions of workers to lose access to advice if commissions banned in group risk appeared first on AdviserVoice.