In a statement to members, Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston said the group is willing to test its position in the courts, “including the High Court if necessary”.
“The AIOFP will be challenging the minister over the legal validity of the proposed amendments to section 99FA of the Superannuation Industry (Supervision) Act 1993,” Johnston said.
“We have sought an initial legal opinion from Hamilton Locke partner Simon Carrodus around client privacy issues and concerns about superannuation trustees reviewing statements of advice (SOAs) that may contain product information and advice about other superannuation funds or a member’s non-superannuation products.
“We will then be seeking a KC’s opinion to back-up our view that the legislation is flawed, unworkable and not in the best interests of consumers.”
He added that the advice community is growing tired of a government that is making it more expensive to provide advice to consumers, which is “directly undermining the objectives of the Quality of Advice Review”.
“There is already an effective consumer protection mechanism in place with the Australian Financial Complaints Authority (AFCA) expeditiously handling consumer complaints about advice matters. The industry doesn’t need another expensive and unnecessary overlay of compliance that consumers will end up paying for,” Johnston said.
“The irony of this extraneous legislation is that superannuation trustees are generally uncomfortable with the role of ‘SOA gatekeeper’ being forced upon them by government. The Delivering Better Final Outcomes legislation was supposed to reduce the compliance burden on superannuation trustees, not add to it.”
Existing act riddled with issues as well
Speaking with ifa, Hamilton Locke financial services partner Simon Carrodus explained where the issues lie in not just the newly drafted section 99FA of the SIS Act, but also the existing one.
“The privacy issue is a huge one. I just don’t see any reason why the super trustees need to review the whole SOA,” Carrodus said.
“If anything, they could review the first couple of pages, so the title page with the adviser and the client’s name on it, and the scope of the advice. I just don’t see why they need to review any more than that.
“Super trustees and the advice firms are mostly aligned on this. Super trustees don’t want to do be reviewing SOAs, they’re being forced to do it.”
He added that the current action from the government, which is ostensibly to address recommendation seven of the Quality of Advice Review (QAR), simply does not meet its mandate.
“The frustration is that we went through the Quality of Advice Review and Michelle Levy did some fantastic work. She consulted broadly and spoke to major players on all sides of the debate, domestically and internationally,” Carrodus said.
“She came up with a list of recommendations, one of which is recommendation seven, which basically says the super trustee must obtain consent, of course, to pay a fee out of a member’s super account for financial advice. That’s fine, but she said we need to streamline it and make it easier for super trustees to comply.
“Super trustees want certainty around what their obligations are. They generally do not have qualified financial advisers on staff, so how are they supposed to review a SOA and determine whether the requirements of the Corporations Act have been satisfied? There’s so much uncertainty for super trustees. The purpose of recommendation seven was ‘provide superannuation fund trustees with more certainty about paying advice fees agreed between a member and their financial adviser’ and this legislation misses the mark.”
However, as a similar argument could be made that the existing version of s99FA also creates privacy issues, simply attempting to block the legislation would mean the industry is “left with the status quo, which is also not ideal”.
“The changes to s99FA don’t really move the needle. The industry was looking for something more significant and [Minister Stephen Jones] really hasn’t provided that,” Carrodus added.
“He’s dropped the ball on recommendation seven, even though his media releases say, ‘we’re streamlining it, we’re implementing it’. He’s missed an opportunity here.
Carrodus explained that, in order to provide certainty for super trustees and financial advisers, s99FA needs to be more prescriptive in terms of what is not required of super trustees.
“Perhaps super trustees should be required to do a sample check of, say, 5 per cent of new advice fees up to a maximum of 50 per year, and that review should be limited to ensuring a SOA is in place, the SOA covers super/retirement and the member has provided their consent. The legislation should clarify that super trustees are not required to review the whole SOA,” he said.
“It needs to be more prescriptive about what a super trustee is required to do and what they are not required to do. That’s what certainty looks like. That’s what a lot of us were expecting, and we are disappointed about an opportunity missed.”
Peter best you invite Stephen Jones to speak at your next AIOFP gathering to help clarify…
There is no coordination between APRA and ASIC. APRA issued SPG530 in 2013 and July 2023, which only has an adviser guideline for the trustees of a whole superannuation fund investment strategy, that ignores individual members acting on SOA and ROAs from their selected financial adviser. ASIC regulatory guideline RG244 ‘Client Best Interest Duties’ has no coordination connect with APRA Superannuation Practice Guide SPG530. Is it funny that the Superannuation Practice Guide has no connect coordination link with Client Best Interests? Both regulatory silos come under the mega silo of Treasury, which does not coordinate with its regulatory silos for advice services to individual superannuation members, yet taxpayers pay huge public service salaries, who do not coordinate their Regulations in a Microprudential framework. I wish Utopia would write another TV series on these misfits. Superannuation Utopia Minister Jones would not know.
It would also be interesting to know the legalities of Labor wanting to limit access to unpreserved non-restricted funds.
Under Labor, no longer will retirees have full and unfettered access to their OWN funds; instead Labor want the Trustees to supervise payments.