AIST suggests areas super funds should be prohibited from advising

Under recommendation six of the Quality of Advice Review (QAR), reviewer Michelle Levy suggested “restrictions on collective charging of fees should be removed” for super funds, effectively allowing them to provide advice on more topics under an intra-fund advice facility.

As previously reported by ifa, Treasury has been hosting roundtables on each of the three streams that make up the government’s QAR response. Engaging in these discussions were various stakeholders, including the Australian Institute of Superannuation Trustees (AIST), the not-for-profit membership organisation representing the interests of Australia’s $1.6 trillion profit-to-member superannuation industry.

AIST is curious to find out if its members are on board with the idea that funds should be allowed to “not only consider” but to advise on a member’s non-super interests – such as recommending a member pay off certain debts before considering increasing contributions.

Another item up for consideration is the idea of granting funds the ability to provide collectively charged advice to non-members, such as to a non-member spouse or a person looking to start a pension, as well as the ability to assist a member with advice implementation.

Laying out its own response to recommendation six, AIST said: “The primary consideration in relation to the collective charging of personal advice is that it must be the best interests of super fund members”.

“Increasing access to personal advice through super funds by collective charging addresses both accessibility and affordability, and further promotes members’ interests if it also clearly protects members from potential harm.”

AIST said it supports a legislative prescription for collectively charging the members of a super fund for personal advice in relation to their fund-related matters and their individual interests and situations, encompassing aspects like household finances and eligibility for social security.

But this legislative prescription, it noted, would have to “clearly and simply” identify the basis for allowable collective charging while detailing the personal advice that is prohibited from being collectively charged.

According to the organisation, the types of advice that trustees should be explicitly barred from collectively charging for should encompass:

• ongoing financial advice service arrangements;
• advice for a non-member spouse (provided this prohibition does not extend to “incidental” or household-level advice where that is appropriate);
• the transfer (in whole or part) of an existing super account balance from one super fund to another super fund; or
• the redirection of future contributions away from one super fund to another super fund.

“Consumer protections will be significantly improved by specifically identifying the types of advice that are excluded from collective charging,” AIST stressed.

The organisation further explained that the prohibited list encompasses the “types of advice taken advantage of by bad actors”, as identified by the Financial Services Royal Commission and the Australian Securities and Investments Commission (ASIC).

“This approach is aligned with proposed reforms that open up advice to members provided by super funds, aligned with the objectives of more advice to more members, in an accessible and affordable way,” it explained.

AIST, however, added that “further consultation is required in relation to any statement about the basis upon which trustees may collectively charge for personal advice to members”, including also the meaning of “simple and ongoing advice”.

Last month, the chief executive officer of the Financial Advice Association Australia (FAAA) told ifa that during her participation in the roundtables, what surprised her was that superannuation funds don’t have consensus on the government’s QAR response.

“What was most surprising to me was that in stream two, super funds themselves were not aligned on what they thought [of] stream two … And that surprised me, because I guess I thought they would be pretty happy with the idea that they could employ people who weren’t fully qualified to talk to their members about super,” Sarah Abood said.

In June, Financial Services Minister Stephen Jones revealed the government’s response to the QAR final report, categorising it into three distinct streams. While stream one related to more pressing issues directly impacting advisers, such as the suggested replacement of statements of advice, stream two was all about allowing super funds to expand their provision of advice.

And while many in the industry had believed that the funds would rejoice at the government’s announcement, according to Ms Abood, what has emerged is the opposite.

“I won’t name them, but there were a number of funds, some of them were industry funds that were saying, ‘No, we don’t think that that should happen. We don’t think that non-relevant [providers] should be providing advice from super funds’,” she said.

“There were certainly differences on the best interests duty, on the good advice framework, and so on. They’re definitely not advocating as a block, they are not all saying the same thing.”

The government is expected to unveil its final QAR response by the end of the year.