If the royal commission recommends the separation of product and advice when it reports later this year, super funds providing intra-fund advice to members will be caught between contradictory regulatory pushes.

Industry Fund Services chief executive officer Cath Bowtell says separating product manufacturing from licensing financial planners would be an obvious response by the royal commission to the issues presented by vertical integration but would be at odds with the Productivity Commission’s recent review of the superannuation industry.

Bowtell says the PC recommends best-of-breed super funds provide intra-fund advice – and that is clearly a situation in which the product manufacturer also provides advice.

“So you’ve got two reviews at the moment that are pushing in different directions, and I think that’s going to be the most interesting thing that we’re going to have to navigate over the next 18 months,” she says.

Bowtell says vertical integration can be good for consumers if the incentives build into the structure are right.

“But I don’t think that’s what we’ve seen over time,” she says, and responses to date by vertically integrated institutions do not adequately address the conflicts.