Speaking at an event in Sydney on Tuesday, the Financial Services Minister 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, looking back at Levy’s final report, her recommendation says that super trustee must obtain consent to pay a fee out of a member’s super account for financial advice, but does not suggest that funds need to check every statement of advice (SOA) to satisfy that the advice provided is indeed about the member’s interest in the fund.
Recommendation seven reads: “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 the member’s interest in the fund on the direction of the member.
“The objective of this recommendation is to provide superannuation fund trustees with more certainty about paying advice fees agreed between a member and their financial adviser from the member’s superannuation account and ensure that adviser fees are not paid in breach of the SIS Act and are not taxable benefits for members.”
Breaking it down for ifa last month, Hamilton Locke financial services partner Simon Carrodus said the action from the government 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 told ifa.
“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.”
Carrodus conceded that the existing version of s99fa also creates issues but cautioned that “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.”
“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.”
He said it – “… members should be supported by financial advice…”. Sounds like he is talking about in house advice to me?
If you were a Liberal voter and were a member of an Industry Super Fund, how would you feel if you were to discover that for many, many years, the Trade Union movement and Labor Party associated entities were the recipients of tens and tens of millions of dollars of re-directed Industry Super Fund’s Director’s fees ??
The Directors of the your super fund are supporting the political party you do not support and possibly have never supported.
However, your super fund continually and repetitively promotes that its “all about our members”.
It is deception and the current debacle that is Jones’ mismanagement of Financial Services legislation is no different.
If you go to the hardware store looking for red tape, you wont find any.
Just after they were elected, the Labor Govt instructed Stephen Jones staffers to travel the country buying up all the red tape available at the time and placed an order for all future stocks because they will need as much as they can.
Jonesy is pandering to his poppet masters Industry Super to make it harder for Real Advisers.
Given Every Member if Industry Super Pays Hidden Adviser Commissions for mostly No Service.
And these Hidden Commission’s are not signed off, agreed or every known they are paid by most members.
The Hypocrisy is so crazy and typical of Industry Super.
Old mate Stephen Jones speaks and somehow the truth changes! A man that simply can not be trusted.
They simply cannot help themselves – stuck in a fantasy world of “let’s govern them harder and harder”…
If the regulators are struggling to fill their work days then maybe regulation isn’t for them – resign, get appropriately qualified and come into the real world and do real work like we do every. single. day.
Jones is a liar and a puppet of the union funds. He spoke a big game before the election and has delivered nothing, and is now hiding behind his version of what the Levy report says. He is just upset that a spotlight is being put on his efforts to ban clients using their super monies to pay for advice. He doesn’t care about clients he only wants to please his union fund masters.
It is crystal clear that Minister Jones is either incompetent or lying or both.
How can it be anything else.
Where is the red tape relief ??
You have to wonder what’s going through Michelle Levy’s mind. All her hard work has not only come to naught, her recommendations have been the basis of the addition of even further red tape and complexity in the delivery of financial advice.
Pity nobody in this government understands the concept of “start with the end in mind”……….. or do they?