The first Delivering Better Financial Outcomes bill, which comes off the back of the Quality of Advice Review (QAR), has caused concern over revised requirements for superannuation fund trustees processing financial advice fees.
Namely, the legislation sets out a number of requirements that need to be satisfied before a trustee can charge the cost of advice against the member’s interest in the fund.
In its initial response to the proposed legislation, the Financial Advice Association Australia (FAAA) highlighted this measure as a main area of concern.
In submissions to the Senate economic committee’s inquiry into the bill, super funds have also highlighted concerns, while backing the overall amendments to section 99FA of the Superannuation Industry (Supervision) Act (SIS Act).
“We acknowledge that they clarify existing legal obligations and in doing so, help ensure that payments from members’ accounts for advice are consistent with the sole purpose test and reflect the services provided to members,” AustralianSuper said in its submission.
The Association of Superannuation Funds of Australia (ASFA) added that it “strongly supports” the goal of greater availability of financial advice for superannuation members.
“ASFA member organisations are interested to ensure there are measures in place that allow for increased access to advice while providing necessary consumer protections,” it said.
“ASFA supports the aim of the bill in legislating recommendation 7 of the Quality of Advice Review, to clarify in law the legal basis in the Superannuation Industry (Supervision) Act 1993 (SIS) for superannuation trustees to charge members for financial advice from their superannuation account.
“In doing so, ASFA understands the intention of the bill is to codify existing obligations with respect to trustee oversight of advice fee deductions from members’ superannuation accounts.”
The Super Members Council (SMC) went as far as to push for an even quicker implementation of the reforms.
“The committee recommend the Senate fast-tracks passage of this legislation so millions of Australians can benefit from these changes swiftly,” it said in its submission. It also recommended that the Senate “support the original proposed commencement date – to start three months after royal asset” instead of 12 months.
Avoiding costly new processes
However, despite this broad support, the super funds were also united in calling for the process of checking statements of advice (SOAs) remain unchanged, with ASFA and AustralianSuper both specifically referring to a joint Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) letter to trustees on the matter from 2021.
In the letter, under further guidance on oversight of advice fees charged to members’ superannuation accounts, the regulators noted that there is “not need to obtain a copy of every SOA produced”.
“However, the capacity to access SOAs and related documents provided by financial advisers, on request, should generally form part of trustees’ assurance processes,” it said.
ASIC and APRA added: “Reviewing SOAs and related advice documents would enable trustees to check that the expected financial advice service has been provided, and that it complies with the sole purpose test. Trustees are not expected to review individual pieces of advice for quality, value or appropriateness.”
Speaking at an FAAA roadshow in Sydney last week, ASIC commissioner Alan Kirkland stressed that the corporate regulator still holds this view.
“We’ve been trying to provide some early guidance in relation to the issue … around the obligation of superannuation trustees, to clarify that under those proposed reforms, as under the current law, it’s not our view that super trustees are required to check every statement of advice and we’ll continue to do our best to make that clear,” Kirkland said.
AustralianSuper requested clarity within the legislation that this will still be the case once it is passed.
“A clear statement in the explanatory memorandum, or from the regulators, that similar expectations will continue to apply to the amended law, would provide trustees with comfort that provided they are proactively and regularly sampling advice documents, they do not need to build new governance and assurance processes, the cost of which would be passed onto members,” it said.
ASFA agreed, arguing in favour of a “measured, risk-based approach by trustees” to protect consumers while supporting access to cost-effective advice.
“With this in mind, superannuation trustees are concerned to ensure they have certainty in continuing to discharge their oversight obligations around the deduction of advice fees from members’ accounts, and that no unintended consequences result from the introduction of these provisions,” ASFA said in its submission.
SMC also called for the government to include an explanation in the explanatory memorandum and parliamentary processes that the “intent of the legislation is for trustees to be able to continue to take a risk-based approach”.
‘Desire to remove appropriate oversight’
On the flip side, however, Super Consumers and Choice took a more combative view, pushing against the deduction of advice fees from superannuation accounts entirely.
“Super Consumers Australia has previously outlined that people may be more likely to value advice if they have to actively pay for it from their own pocket, rather than have fees deducted from their super account,” the consumer groups said in a joint submission.
“There was compelling evidence in the financial services royal commission and the ‘fees for no service’ actions brought by ASIC that there is a high risk people will be ripped off if fees can be charged from super with limited oversight.”
They also made the case that concerns over the bill’s drafting are unwarranted and a result of fearmongering from advisers.
“The financial advice industry has attempted to argue that the reforms in the bill will increase red tape for advisers and require trustees to check every piece of advice individually,” the consumer groups said in a joint submission.
“There is no basis for this argument, which appears motivated by a desire to remove appropriate oversight of advice deductions from super and reduce consumer protections.”
The groups argued that, given ASIC and APRA have already provided clear regulatory guidance that trustees do not need to obtain a copy of every SOA, there is nothing for either trustees or advisers to be worried about.
“Trustees and advisers should already have the oversight processes in place that law and the regulators expect of them. If they do, it is difficult to see why the new provisions in the bill will require major changes, either to industry practices or to the regulators’ guidance,” the submission said.
“To the extent that there is uncertainty in how trustees should exercise their new obligations, expectations about how they should exercise oversight in practice could be set out in the explanatory memorandum and supplemented by further guidance from the regulators if necessary.”
In the meantime, currently there are multiple ads on Facebook referring ‘consumers’ to brokers, lenders, developers and certain other unlicensed charlatans to obtain what they think is advice on: ‘How to Buy an Investment Property using your Super’.
Clear as day a lot of that stuff will end in tears, however ASIC and the Govt is still preoccupied with ‘other stuff’ i.e. a basic policy assumption that every ‘licenced adviser’ is a criminal and that every ‘client’ has dementia.
They’ll eventually catch on to the real issues when it’s too late then pass their ineffective and exorbitant cost structure in the form of an increase in their unfair & inequitable Adviser Levy charged to what is left of the hardworking and honest ‘licenced adviser’ sector.
In my opinion ;
When it comes to being punished, financial advisers are considered professionals.
When it comes to almost everything else, advisers aren’t professionals and cannot be trusted to do anything.
This conversation is just another version of that.
Why does Choice/SCA have this weird position where they don’t agree with people using “their super” to pay for professional advice regarding “their super”?
Why doesn’t someone come and ask my clients their thoughts about the value of advice and how they prefer to pay for it?
I’m pretty sure my clients wouldn’t keep signing fee renewal forms if they didn’t value it.
Trustees should check NO SoAs if the fee deduction from an ASIC Registered Adviser. It’s already captured in consumer protections and overly cumbersome compliance as admitted by not only both political parties but our incompetent regulator, ASIC. What a pathetic initial piece of legislation from an impotent and incapable minister.
Choice and Super Consumers are anti-financial advice and an utter disgrace. If they actually surveyed consumers of financial advice, and asked them if they support their personal financial advice documents being sent off to faceless super fund employees to be audited and stored, how many of them would support that? I suggest the number would be very close to 0%. In fact, the vast majority would be outraged at the possibility.
Choice also went on to say in their submission that the Breville 4 Slice Toaster is their pick of the month and if you want to know more about it, you can take out a paid subscription with them that is so difficult to ever cancel, you’ll need to take a week off work in order to do so.
Do you have to opt in each year with your Choice subscription? do they issue a FDS that you need to sign in order to continue your subscription? Then sign a fee consent form each year to allow Choice to deduct fees from your bank account? Does the Bank then ask Choice to provide evidence that they have provided “advice” to you as well, by asking for the details of the toasters you have looked up?
How absurd this whole thing is!
Effectively another regulator – who is potentially conflicted to retain FUM?
Imagine, sending in an SOA with the Rollover request for a large account to Super Fund ABC?
What could possibly go wrong?
well they might read it and realise that all the adviser has done is rollover the funds and charged a whopping fee to wipe out the benefit of the rollover. That’s never happened before though has it?
Just remove that requirement from the legislation. A trustee is bound to act hyper vigilantly, so get rid of the SOA checking. A ONE OFF client consent form (for ongoing fees) is all that is required, until that dollar fee is changed. Simple as that. The problem in this nation is that a good percentage of the 90,000 practising lawyers are employed by Govt agencies, whereas there are only 15,000 advisers left. Until that imbalance is addressed, millions of busy working families will never access sound retail advice
Absolute madness. You don’t have your pharmacist checking your doctors process and records before issuing a script. It’s also a huge privacy issue, find me a client that would want some unknown third-party person within a superfund reading a document with all their personal information throughout. Then if we’re required to redact that information, the amount of time to do so will be ridiculous.
This is crazy, I am embarrassed that this is how the government and ASIC ‘reduce red tape’. If the client signs an industry-wide Consent Form that says they have received advice and consent to fees being deducted, why should anyone be looking at SOAs? Even a sample?
And more importantly, who looks at the advice from the Super funds, when they advise clients into their own product? Do they have to submit their SOAs to someone for checking?
The ultimate motive is control. Make life hard for advisers, more advisers leave. Make life harder for clients, more clients opt for the simpler path. Less advised clients = a less informed population, that is easier for the Government to control. Labor (and Liberal) want control over the superannuation pot so money can flow into Government infrastructure projects and other initiatives, such as green energy. Communism in the making!
They don’t care the government just need to please their industry fund bosses, uniquely Australian incompetence and over regulation. No other country in the world is more bias against advisers trying to help Australians who won’t flog just 1 product