Speaking at a Vanguard event in Sydney on Tuesday, Financial Services Minister Stephen Jones said the government followed recommendation seven made by Michelle Levy in the Quality of Advice Review (QAR) when it decided to tackle section 99FA of the SIS Act.
“The Quality of Advice Review said that there is some shaky legal ground for paying financial advice out of superannuation. As a responsible government, we thought it was something we needed to fix up,” Jones told an audience of advisers.
“We think members should be supported by financial advice on how to ensure their superannuation is meeting their needs and paying for advice fees out of superannuation meets that goal. That’s the only reason we’re touching the law, to put it on substantial legal footing.”
However, Association of Independently Owned Financial Professionals (AIOFP) chair of technical services Lionel Rodrigues argued that the government has not adequately addressed recommendation seven of the QAR.
“The issue of payment of advice fee from a superannuation account was canvassed by the QAR, released in December 2022,” Rodrigues said.
“Here the reviewer adopted the strict legal approach that such fees may contravene s62 of SIS (Sole Purpose Test) and there were doubts raised as to the legality of advice fees deducted from a superannuation funds (‘a member’s interest’) and the liability of superannuation trustees to pay such advice fees.”
Recommendation seven of the QAR stated that “superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about a member’s interest in the fund on the direction of the member”.
Importantly, it also stated that the objective of the recommendation is to “provide superannuation trustees with more certainty, about paying advice fees agreed between a member and a financial adviser”, while also noting that “the SIS Act would authorise the trustee to pay an advice fee, including an ongoing advice fee, on the direction of the member”.
Levy also recommended that section 99FA of the SIS Act “be repealed and replaced with a provision giving trustees permission to pay, on the direction of a member, a fee for advice”.
Rodrigues said that, in his professional opinion, it was not Levy’s intent that “superannuation trustees have any discretion upon the direction of the member”.
“I have submitted that superannuation trustees are not qualified to assess superannuation financial advice as to a ‘member’s interest’ and they do not wish to accept the liability to make such decisions,” he said.
“For the professional adviser, there are issues with breaches of privacy laws concurrent with breaches of the Code of Ethics under s921 of the Corporations Act.”
He added that it is “regrettable” that the minister has not adopted this part of the QAR recommendation.
“The QAR reviewer recommended a repeal of s99FA SIS. This has not happened. Changes to s99FA SIS have not reduced legislative uncertainty. This is compounded by pronouncements by ASIC and APRA,” Rodrigues said.
“The repeal of s99FA would have been concise and provided superannuation trustees, superannuation members and the professional financial adviser the statutory clarity desirable amongst a myriad of compliance requirements.”
Can we all stop calling industry funds “not for profit” funds??? They charge the same MER’s as retail and wholesale funds. The “profits” just go to the unions and industry fund management. They are just as profit based as any other public offer fund.
Can’t wait to see who the AIOFP tells everyone to vote for @ the next election…
My money says it won’t be Labor again…!
As an Advisers we have come across situations where the client’s Industry Fund has refused to pay an agreed fee in the past. Despite the advice meeting the sole purpose test. There has already been situations where Industry Funds have argued they will not fund the client fee because it relates to other superannuation interests and not just the one in their fund, despite it being for purposes like commencing a retirement income stream or super consolidation.
I echo the above comments and the only thing that is clear from the actions of this minister is the existence of a hidden objective.
Trustees of Superannuation are just that, this does not authorise them to lord over people’s well-earned retirement savings. They are custodians and nothing more.
It is deeply worrying that the Labor government is seeking to usurp a retirees access to their own pension fund assets.
If a retiree signs a form that a payment is to be made, that should be the end of it – there is absolutely no role for the Australian Labor Party to impose oversight on how the retiree spends their money.
Jones says “We think members should be supported by financial advice on how to ensure their superannuation is meeting their needs and paying for advice fees out of superannuation meets that goal. That’s the only reason we’re touching the law, to put it on substantial legal footing.”
If this was even remotely true, he would have no problem making the small amendment to 99FA to match the amendment made in the EM.
By including the clarification only in the EM, he is deliberately planting a time bomb for ASIC and APRA to exploit at their discretion to destroy independent financial advice in this country. One can only assume this is the plan, and given the desperation of industry funds (who have always viewed financial planners as competitors) to get this legislation through, I think it is pretty damned obvious what is happening here.
If you listen carefully to what Jones is saying he is not lying. He thinks members should be supported by financial advice. However,, what he is not saying is that the financial advice will only be coming from the new conflicted “Qualified Advisers” who will work for industry super funds.
What Jones is doing is crystal clear. He has made the operating costs for real financial advisers more expensive with the CSLR while at the same time removing our ability to receive revenue for our work by making advice fees paid from a members account a breach of the sole purpose test. The fact that the CSLR levy and ASIC funding levy increase significantly per remaining adviser as advisers leave the industry is a deliberate action that will bankrupt the advisers who try to hang on.
Evil is at work behind closed doors.
[quote=Anonymous]Preventing union super fund members from accessing professional independent advice is the intent of Jones’ proposed legislation.
The unions absolutely hate it when their primary funding source is reduced by “Industry” super members withdrawing money to pay for independent advice. They also hate it when retired members withdraw money to:
– pay off debt
– make improvements to their home
– upgrade their car
– go on a holiday
– assist struggling family members
– invest tax free outside the constraints of super
QAR has been hijacked to help the unions retain more money in “Industry” super where it can be used for union purposes, rather than allowing members to withdraw retirement savings for “frivolous and unnecessary” purposes.[/quote]
Indeed.
The non-profit space sees super as “the states” money that should be used “as and when allowed”.
While the rest of the country sees super as the member’s money that happens to sit in an account with some tax concessions.
It’s a fundamentally different view of the world.
But then again, that’s how Collectivists think.
Rodrigues is absolutely correct to say that Levy’s intent was NOT to create prohibitive, friction-based changes to the law. The “uncertainty” mentioned in the QAR was likely a material exaggeration, hyped up by non-profit voices. Levy was absolutely right to recommend that changes be made giving trustees “permission to pay, on the direction of a member, a fee for advice.”
It’s highly probable that Jones never read the full QAR but had his staffers do it. Levy also accurately stated that trustees “are not qualified to assess superannuation financial advice as to a ‘member’s interest’ and they do not wish to accept the liability to make such decisions.” This is obviously true, and for Jones to pretend he is following Levy’s recommendations is an outright falsehood.
Jones is The Sandman, trying to pour sand into the whole system, and Rodrigues is absolutely correct to call him out. The changes to section 99FA have not reduced legislative uncertainty and have only compounded the issues, as Rodrigues rightly points out. The repeal of s99FA would have provided the clarity needed for trustees, members, and advisers. Instead, we are left with more confusion and an unnecessary regulatory burden.
Where is the red tape relief ?
Still waiting.
My fees are increasing significantly on 1 July.
Inflation plus ADDITIONAL red tape necessitate this.
Well articulated as always Lionel
Preventing union super fund members from accessing professional independent advice is the intent of Jones’ proposed legislation.
The unions absolutely hate it when their primary funding source is reduced by “Industry” super members withdrawing money to pay for independent advice. They also hate it when retired members withdraw money to:
– pay off debt
– make improvements to their home
– upgrade their car
– go on a holiday
– assist struggling family members
– invest tax free outside the constraints of super
QAR has been hijacked to help the unions retain more money in “Industry” super where it can be used for union purposes, rather than allowing members to withdraw retirement savings for “frivolous and unnecessary” purposes.