Speaking at the Financial Services Council’s (FSC) post-budget briefing on Thursday morning, Financial Services Minister Stephen Jones said the amendments to the SIS Act within the first QAR bill will “clarify the law to affirm the status quo”.
“What we’re trying to do here is clarify the law to affirm the status quo, because the status quo was put into question as a result of Michelle Levy’s review and she put a spotlight on what she thought was the deficiency within the law to support status quo practice,” Jones said.
He added that the government believes that it has “got it right”, but it is important to “draw the regulator into this conversation as well”.
“They’re independent of us, of course, but I think we need to bring them into the conversation as well,” Jones said.
Responding to the minister during the briefing, FSC chief executive Blake Briggs said there is broad agreement between the industry and the government on the policy objective.
“We’re trying to collectively make advice more affordable and accessible, and the role of superannuation funds play in delivering that. I think the responsibility on us is to convince you that our interpretation of those provisions are correct, and that it goes beyond the status quo,” Briggs said.
However, he took issue with a seemingly contradictory tone that the Australian Securities and Investments Commission (ASIC) has taken on the topic, specifically within the report the corporate regulator released last week.
“You look at what ASIC said quite recently in their report and there was this extraordinary tension between them saying, ‘Trust us, you only need to do a risk-based assessment. But we’re going to use really inflammatory language to criticise the industry for their current practice, which is risk-based assessment’,” Briggs said.
“I find it hard to see that you can have it both ways at the same time that we’re going to give the industry a crack on one hand but then also tell them that the current approach is acceptable on the other.”
Separately, Briggs told ifa the ASIC report highlighted the “legal risk and uncertainty” for super fund trustees conducting assessments of advice fee deductions from superannuation accounts, “and unfortunately, the Assistant Treasurer’s advice reforms before Parliament compounds the legal risks for superannuation funds”.
“ASIC’s assertion that funds are only expected to conduct risk-based assessments of statements of advice are incompatible with the heavy-handed language in its report, only serving to highlight the regulatory risks for funds and the need for clear legal obligations in legislation,” he said.
“If the government’s intent is that funds are not required to check every statement of advice for compliance, this should be clear in legislation, and leading legal practitioners have made it clear to the government this is not the case in the current bill.”
Briggs further called on Minister Jones to “ensure his legislation achieves our common policy objective of making financial advice more affordable and accessible by consulting in good faith on how to amend the bill before Parliament”.
FAAA flags errors
Also speaking with ifa, Financial Advice Association Australia (FAAA) general manager for policy, advocacy and standards Phil Anderson said the FAAA was “surprised” to see how the numbers were presented in the ASIC report.
“A 1 per cent raw fee for no service issue is a fairly moderate issue and only 15 cases,” Anderson said.
“Then the 328 cases of over $15,000 per year, but view that in the context. That’s across, I think, 470,000 or so clients.”
He added that it was unclear why the report combined the trustee advice fee review with cold calling.
“We thought it was strange the way they had mixed the review of the work done by trustees with cold calling and super switching and to mix them into the one report but then provide no data as to what they discovered from a cold calling perspective,” Anderson told ifa.
“We were puzzled by that. There are a few other things we were puzzled by. We don’t invalidate in any way the fact that trustees have responsibilities and to the extent that three of the 10 were not doing any checking is a key finding. We take the cold calling super switching issue very seriously as well.
“In fact, we have reported a number of cases to ASIC that we were unhappy about in the marketplace. There are some questions about the framing of the report, but some of the underlying substance is very valid.”
Responding to ifa’s questions about the report last week, an ASIC spokesperson explained that the regulator is “engaged in cross-sector work on the issue of trustee oversight and cold calling operators” and that Report 781 is “just one part of this broader project”.
“As noted in our cold calling surveillance work, we have observed unusual volumes of superannuation savings flowing from a subset of advisers and licensees into high-risk property managed investment schemes – either via platform superannuation products offered by APRA-regulated funds or a self-managed superannuation fund (SMSF) – and associated payments made to cold calling businesses,” the spokesperson told ifa.
“People that switch their super accounts as a result of these cold calling operators are often paying thousands of dollars in upfront advice fees and higher ongoing fees as a result of inappropriate advice.
“ASIC’s view is that these inflows should have triggered further investigation by trustees, which may have occurred if trustees had better oversight practices in place.”
Its pleasing to see “inflammatory language” called out. The use of language to get “clickbait” by both government and especially regulators has significantly increased. This is creating division and making it difficult to have mature and sensible conversations. We need the system working together to deliver better outcomes for Australians not divided. Toooooo much self-interest from both government and regulator “masked” as doing the right thing. Stop using media and start engaging with industry in a meaningful way.
Hopefully someone challenged ASICS inflammatory research which is bias, unfounded and doesn’t match their messaging. Hopefully challenges their overreach and explains they should have no place in creating regulations and should focus on enforcement. Hopefully someone lets ASIC know and challenges the fact their remit should include providers and MIS and NOT just Advisers who are responsible for less than 3% of afca complaints but subject to 90% of their budget… disgusting
The total obsession with regulators and Govt’s regarding fees is unhealthy.
They are so manically obsessed with the lowest fee possible…anything else and the client is getting ripped off!
This is completely juvenile.
There is nothing at all wrong with a client making a fully informed choice and electing to transition superannuation monies or investments to an alternative product or suite of products if the fee structure of those alternatives is higher than they are currently paying and there are some very clear, identifiable and beneficial advantages of that decision that meet and satisfy their stated and documented objectives.
People have the right to pay higher fees if they so choose as this is a business decision based on a cost benefit analysis.
You don’t choose the cheapest Doctor, Lawyer, Builder or Accountant if you can afford someone better than the cheapest as they often deliver a better outcome.
If you cant afford anything other than the cheapest of the cheap, then that sort of individual is obviously not a potential client of a Financial Adviser as they will most likely be unable to deliver any form of business value to the Adviser’s practice.
And at the end of the day Financial Advisers are in business to make money.
So for all those in Govt, regulation and so called “Consumer” groups, grow the f*#k up !!
Well said by Blake and direct using evidence calling out ASIC, rather than FAAA doing nothing but complain.
ASIC rushed the release of the research and loaded it with misleading and inflammatory language to once again defame our profession and influence Parliamentarians. They were clearly involved in the disgraceful draft legislation before Parliament and this attack on financial advisers is an attempt to block sensible amendments.
This is 100% correct
That’s why the never released their submission to the Levy Review even when they were asked under freedom of information