Staff Benefits and Superannuation Proposal

Proposal for< <Company ABC Limited>Page 1 of 31

Staff benefits and superannuation proposal

for

Company ABC Pty Ltd>

Statement of Advice

Provided by

John/ Jane Adviser

Authorised Representative (No.< xxxx>) of:

<Adviser Practice Pty Ltd>

Australian Financial Services Licence No.< XXXXXX>

<Ph: (02) 9444 1234 or Email:

What this document is about

This document is a Statement of Advice (SoA) which explains the advice given to you. It is an important document and it is imperative that you read and understand it before implementing any of the recommendations.

If you disagree with, or do not understand anything contained within this recommendation, please contact your adviser,<adviser name>immediately on<insert phone no>.

<1 October 2010

Contents Page

Objective of this submission ………………………………………………………...3

Executive summary………………………………………………………..4

Present situation ……………………………………………………… ..5

Perceptions of the current position ………………. ……………………………………….6

Possible courses of action …….…………………………………………………..7

Option 1 …………………………………………………………7
Option 2 …………………………………………………………8
Option 3…………………………………………………………8

Our proposal and advice …………………………………………………………9

...The ‘why’ of our proposal ….……………. ……………………………………….9

...The ‘what’ of our proposal …………. ……………………………………………..10

Benefits to our advice ………………………………………………………..10
Product recommendation ………………………….……………………………11
Product service features …………………………………………………….…12
Possible disadvantages to our advice …………………………………………..13

...The ‘when’ of our proposal ………….. ……………………………………………13

...The ‘where’ of our proposal ………………………………………………………..13

...The ‘who’ of our proposal ..………….. …………………………………………..13

Next steps ………………………………………………………..14

PART 2 – Recommendations in detail

Introduction ………………………………………………………….16

Section ASolution on a page ………………………………………………………….17

Section BProposed superannuation fund structure & analysis……………………… 18

B1: Current view of the required solutions …………………………………...18
B2: Specific recommendations on the new fund ……………………….……19
B3: Approved product list ………………………….……………………………..19
B4: Superannuation fund recommendations ………….………………………..20
B5: Cooling off period ...……………………..……………………………….20
B6: Consequences of replacement of one product with another ...……………20
Recommendation outcomes (B1-B6) …………………………………………21

Section CProposed investment solution …………………...………………….23

C1: Your default investment option …………………………………………23
C2: Risk profile …………………………………………24
C3: Risks associated with the recommendation ……………………………….24

Section DProposed insurance solution …………….…………………………. 25

Section EDisclosure of remuneration, fees & benefits ...………..………………….27

Section FStatement of disclosure, disclaimer & other associations ……………….29

Authority to Proceed ………………… ………………………………………………….……….31

Attachments:

Employer Super guide for employers - Product Disclosure Statement (PDS)

Objective of this submission

We are grateful for the opportunity of submitting this Statement of Advice (SoA) for your consideration as you evaluate the options available for improving your staff superannuation plan.

We acknowledge that you have specifically sought advice only in the area of corporate superannuation.

Our objective throughout the process of preparing this submission has been to:

listen attentively to the frank responses you gave to the questions we posed

analyse carefully the fact finder you kindly provided
understand clearly the environment within which your staff superannuation will need to operate
structure a proposal that fits precisely with your vision of how a corporate superannuation plan should meet your stated objectives

Above everything else, we want to ensure that this proposal will deliver benefits to all your employees in the short term, and importantly, on a sustainable, long-term basis as your company grows and flourishes.

You are entitled to receive a SoA whenever we provide you with personal financial advice. Personal financial advice is advice that takes into account any one or more of your objectives, financial situation and needs.

This SoA (incorporating Part 2 Sections A through F) is a record of the personal financial advice provided to you and includes the basis on which this advice is given, information about remuneration including fees, and any other benefits and any interests, relationships or associations which might influence the making of the advice. We are not responsible for the outcome if you act on any advice or recommendations contained in this SoA without our prior written agreement.

If this advice includes a recommendation to you to acquire a particular financial product, (other than securities) or an offer to issue or arrange the issue of a financial product to you, we will also provide you with a Product Disclosure Statement (PDS) containing information about the particular product to help you make an informed decision about that product.

Executive Summary

Your business,Company ABC>, proud providers of sales education and training services>, is undertaking a review of its current corporate superannuation plan and you have kindly provided us with the opportunity to contribute a proposal for consideration.
The current superannuation fund is <a master trust, which has been in operation for nineyears.>
<The fund has ‘underperformed’ and frustrations have consequently arisen, leading to your view that, among other issues, the current structure could be improved upon.>
We have held several interviews with decision-makers in the organisation and sought answers to a number of key questions.
<During the course of examining existing arrangements, we became aware that, for no obvious or planned reasons, benefit levels differ substantially between employees (significant variations in levels of risk cover, for example)>. You would like these, and related matters examined and improved upon.
<We believe that your options can be defined under three prime headings:

retain current arrangements

move some or all members to a fund run by a large institution or industry fund,or

explore a fresh approach to the entire program

We have provided brief analysis on advantages and disadvantages of each option (pages 11 and 12).
It is our advice that the interests of the company and its employees will best be served by adopting a fresh approach – and one that incurs no greater outlays or costs than is currently the case.
The main focus of our proposal addresses a description you gave us of the ideal arrangement: ‘we would turn our fund from being a routine acceptance of the superannuation status quo into an opportunity in which our staff would take a keen and positive interest’.>
In seeking to win the privilege of looking after your staff superannuation, we realise that a smooth transition would be very high on your agenda. For that reason, we have proposed some simple ‘next steps’ that we believe will diminish any possibility of disruption or inconvenience (refer page 14).
Finally, we believe that our proposal will meet – and exceed – the objectives you have set to ensure you have an appealing, sustainable and competitive staff superannuation plan.

Present situation

Your business,Company ABC Pty Ltd, an unlisted limited liability company, is a successful provider of education and training services to the corporate market throughout Australia.

As part of your ongoing improvement program, you are undertaking a review of existing staff superannuation arrangements for the company.

Overview of the current staff benefits program:

Fund type / Accumulation (defined contribution)

Fund history

/ <Individual deed established in 1990; transferred to master trust in 1996>
Current arrangements / <Delivered by PMF Planners (dealer group and advisers)>
Categories / <While there are different contribution levels, there appear to be no defined categories>
Group Life / <All have group life (and some have TPD), though the basis is not clearly defined.
The insurers are Marsh Mellow Insurance Brokers Ltd>
Investments / <Managed within a master fund product recommended by the incumbent planners.
Details of the investment portfolio as at the last review date are in Pt 2 Section C>
Group Income Protection / <There is no group income protection program at this time, within your superannuation or as an employee benefit arrangement>
Contribution percentages / <Vary according to employee status of member>
Number of members / <90>
Current fund assets / <$5 million>
Contribution level / <$518,000+ in the last financial year (salary sacrifice is undertaken for some members)>
Documentation provided / <Last annual review – Annual report
Member booklet/Product Disclosure Statement (PDS)
Example member statement>
Response to fact finder
Other information / As provided during meetings held

WARNING: The advice contained in this SoA is based upon information that we have obtained from you. You must ensure that the information is accurate and complete. Otherwise, the advice may be based on inaccurate or incomplete information about the needs of your employees’ investment objectives, financial situation or needs. You must therefore assess before acting on the advice whether it is appropriate in the light of your own individual investment objectives, financial situation and needs.

While it appears the fund complies with relevant regulatory requirements, areas exist that do not measure up to your expectations. These are discussed more fully in the next section.

Perceptions of the current position

These were posed in order to gain a clear and full appreciation of the vision you have for the future of your staff superannuation and to contrast that with how you see current arrangements. This includes assessing your key financial needs with respect to your employee superannuation plan.

After conducting a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis, we gained the following perceptions including, the ‘If we had an“ideal situation”, this is how our arrangements would look’ issue, and the most pressing issues facing the company in the next 12 months:

Strengths /

<You’ve had a relationship with <PMF for 8 years.>
Company ABC> has grown ‘comfortable’ with the standard of services supplied.
The fund is compliant with relevant government regulations.>

Weaknesses /

<The fund lacks a clear structure (varying levels of benefit and contributions).
There’s little evidence of member enthusiasm.
Important priorities are not being met (e.g. member education).>

Opportunities /

<The provision of a clear, logical and appealing fund structure.
The creation of strong and enthusiastic member interest in their fund.
The alignment of the fund’s provisions with your company’s strategic direction.>

Threats /

Possible inertia (deferring reform of the fund).
Personal relationships might obstruct objective reform.
Incumbent provider will probably try to retain the business.

Your response to “ideal situation” question

We would know where we stood on superannuation issues and Canberra would stop changing the rules.
We would turn our fund from being a routine acceptance of the superannuation status quo into an opportunity in which our staff would take a keen and positive interest.
Our fund would be part of overall strategy instead of just an expensive appendage.

Important organisational issues for next 12 months /

<You wish to boost staff morale, which has been a pressing concern.>
<You are projecting growth in your products and services.>

Possible courses of action

Your review of the fund will lead you to several possible options, of which we believe the following three are the main possibilities:

you could retain your current arrangements
you could move to a no-frills service provider (industry fund)
you could explore a fresh approach to staff superannuationto achieve your main objectives

We briefly discuss each of these main options below (refer Pt 2. Section Bfor additional detail).

1.Retain current arrangements

The advantage of taking this option is that it will involve the least amount of administrative change and commensurately, the least cost to the company. You will continue to incur the same costs involved with the current superannuation fund arrangements.

The disadvantage is that, because it means ‘more of the same’, it is unlikely to resolve any of your current concerns and, therefore, is less likely to see your vision for a robust staff benefits program realised.

It is a possibility, but probably not a very practical, or desirable one given your stated needs.

2.Move to an industry fund

The advantage of taking this option is that it may deliver potential benefits in the form of:

continuing compliance with provisions of ongoing legislative and industrial relations matters (large organisations generally focus heavily on superannuation compliance issues)
provision of a relatively low-cost administration service in many cases

Products provided by industry funds, are designed to address the basic superannuation needs of many thousands of members and consequently disadvantages include:

a general inability to deliver personalised services to members
a lack of ‘visibility’ of fund service providers due, largely, to the way in which industry funds structure their service delivery standards

If you took this direction, we do not believe that it will satisfy all of your stated objectives.

3.Explore a fresh approach to your staff superannuation

The advantage of considering this option is that you could achieve a number of substantial benefits, including:

addressing your current perceptions of weaknesses and threats, as expressed in the SWOT analysis, while building on existing strengths and opportunities
implementing reforms to ensure, where appropriate, that your employee superannuation fund assists with your corporate objectives
providing competitively costed, high value services covering not only administration but also member education and financial planning for those who have both the need and interest of such benefits

If there is a disadvantage to this approach, it lies in the assumption that making a decision to effect change will involve high levels of effort. Changing superannuation funds may, though not necessarily, involve a change in the costs of your superannuation arrangements (as outlined in Pt 2 Sections B & E).

Any concerns in that direction, however, will be mitigated by adopting a systematic approach to examining both the features and benefits that will be efficiently introduced to a willing and deserving team of employees.

It is our opinion, you will benefit by selecting this option.

A more detailed explanation of our advice supporting this latter option appears in the next section of this (Part 2)SoA.

Our proposal and advice

An examination of both your current position and our joint perceptions of that position, leads us to propose that the third option is in the best interests of the business and all employees of the organisation. While every care has been taken with the preparation of this report, changes to tax, superannuation and other relevant legislation can impact on the advice provided. This report has been prepared in good faith on the basis of our understanding of current legislative requirements as at <date of SoA>.

The full details of all fees and charges involved in this advice are specified in Pt 2 Section E.

The ‘why’ of our proposal:

Your candid responses during our interviews indicated that, in summary, you need a staff superannuation fund that addresses the perceptions of your current position (outlined on Page 6). Specifically our recommended approach:

suggests an alternative, more contemporary superannuation master trust to manage your employee superannuation on an ongoing basis (refer Pt 2 Section B)
ensures that individual fund members have an appropriate ‘default fund’ as well as a range of other investment options from which to select at no additional cost. These options can be changed at any time in line with changes to an individual member’s investment risk profile (Pt 2 Section C)
improves the current level of ‘default’ insurance cover for members within the fund and allows members to increase their level of personal cover, subject to appropriate health checks (refer Pt 2 Section D)
provides a high level of ongoing member education and support services, including regular education seminars and calculators

In addition:

the proposed solution can accommodate individual members who leave your employment, including rollover and pension options at retirement
you can access improved fund administration and member reporting services through the use of ‘online options, minimising the time required for you to administer your employee superannuation and thereby achieving greater efficiency
we have assessed your existing arrangements to establish that there will be no loss of potential benefits (and no exit fees) for transferring fund members to an alternative superannuation arrangement
our examination, leads us to believe you can avail yourself of a solution in the form of a substantial improvement over the program currently in place. Furthermore, we believe the improvements can be obtained for no overall increase in current management and administration costs, neither to you nor to your employee members of the fund (refer Pt 2 Section E)

It is for these reasons, that we confidently recommend our proposal to you.

The ‘what’ of our proposal (with a focus on achieving key objectives):

we structure the superannuation plan to ensure it achieves your stated objectives, particularly in the area of simplicity
we work closely with you to establish a clearly structured, easy-to-understand superannuation plan for all your employees
we resolve what you perceive as weaknesses and take advantage of opportunities
we remove discriminatory factors, establish a level playing field, and help raise morale
we ensure the superannuation plan has the capacity to encourage staff to higher levels of productivity by exploring variable contribution strategies as part of an integrated approach to incentives
the product provider selected will ensure compliance withsuperannuation regulations and legislation
a member education program will be implemented to stimulate the staff interest in superannuation so as to allow them to make informed decisions for greater financial control
we establish a member communications program to create awareness, appreciation, and, above all, greater understanding of the benefits delivered by the proposed staff superannuation plan
we will ensure a smooth and seamless transition
the product provider will support this with a dedicated client service team who are experienced superannuation professionals

Benefits of our advice

The benefits of our proposal to you and your employees include:

greater awareness of how the program can improve the financial well-being of each

and every employee and, thereby, cultivate a strong sense of ‘belonging’ to a caringemployer

a refreshed, more transparent program of staff benefits that will motivate employees,raise
corporate morale and contribute to greater productivity
insurance protection options for all employees
retaining a master trust structure to achieve a substantial improvement in employee

benefits with no overall increase in superannuation fund costs