In a report released on Thursday morning, REP 781 Review of superannuation trustee practices: Protecting members from harmful advice charges, the Australian Securities and Investments Commission (ASIC) has called on superannuation trustees to “renew efforts to protect members from unscrupulous operators amid evidence of inadequate oversight of advice fee deductions”.
The corporate regulator said the findings of the review that are included in the report showed that, despite the financial services royal commission highlighting the deficiencies in trustee oversight, they “continue to pose risks and cause detriment to members”.
“ASIC recognises the importance of access to quality financial advice about superannuation, and acknowledges it is common for advice fees to be deducted from superannuation accounts,” the regulator said.
“However, trustee vigilance can mitigate risks to members from unscrupulous operators, including cold calling businesses using high-pressure sales tactics leading to inappropriate superannuation switching advice.”
The review looked at a sample of 10 superannuation trustees representing around 8 million members, managing a combined $923 billion in assets.
Over a 12-month period, ASIC found that:
- Over $990 million in advice fees were charged across more than 476,000 member accounts.
- Three trustees reported not checking any advice documents on a risk or random basis.
- Fee caps as high as $20,000 or 5 per cent of a member’s balance were in place, with few trustees implementing controls to protect members with low balances.
- Members of 70 per cent of trustees were found with advice fee deductions exceeding $15,000.
- Variability in onboarding and monitoring processes for financial advisers, including limited checks of ASIC’s registers by some.
“Super trustees are responsible for members’ money held within the fund. Effective trustee oversight practices can help mitigate risks and protect superannuation members from real financial harm over the long-term,” ASIC commissioner Simone Constant said.
“Despite repeated calls for an uplift in practices from ASIC and APRA in joint letters issued in 2019 and 2021, our latest review shows continued deficiencies in trustee oversight of advice fee deductions by some trustees.”
She added that ASIC is particularly concerned about advice that is stemming from high-pressure sales tactics.
“ASIC is concerned about the potential impact on superannuation members, particularly amid evidence of balance erosion from fee deductions for advice originated by cold calling business models using questionable sales tactics that pressure members into switching superannuation funds,” Constant said.
“Superannuation trustees should have processes in place to detect and respond to suspicious activity.”
ASIC has urged super trustees to “reassess their oversight processes”, pointing specifically to:
- Reviewing the ways financial advice documents are sampled to identify unscrupulous advisers providing harmful advice.
- Objectively considering the caps on advice fee deductions, including by using objective criteria to assess the cost of advice to help trustees determine appropriate fee caps.
- Enhancing adviser onboarding practices, including by vigilantly monitoring for financial advisers involved with cold calling businesses and using fact finds of advice licensees.
- Regularly checking ASIC’s Financial Adviser Register for unexpected adviser movements that might indicate a problem, maintaining watchlists and monitoring patterns or irregularities in advice fee deductions, withdrawals of member consent and rollovers into the fund.
“Superannuation trustees can uphold member trust in their oversight by ensuring super balances are protected from unscrupulous operators,” Constant added.
“Along with our peer regulator, APRA, we urge trustees to review and strengthen their practices to help members achieve their retirement ambitions.
“As the conduct regulator for the superannuation industry, ASIC will consider acting against trustees found to have breached their obligations to members.”
ASIC said it would publish an information sheet in the coming weeks that would set out how financial services laws apply to cold calling operators, financial advisers, and financial advice licensees.
Just become a real estate agent or mortgage broker, the Govt. and ASIC intentions are to ban all advice fees and get rid of advisers
If a client agrees with the SOA – signs an OFA each year – and agrees at the time to the value the adviser has provided – then there should be no reason the Trustee has to get involved. Each time they put more regulation and rules on us – they have to take something off the table – otherwise there’s going to be a point where we all leave the business.
Ask any Super trustee the difference between advised members and unadvised and they will say it is chalk and cheese – unadvised clients often cash out at the bottom then buy back in when its too late – this alone is often worth the adviser oversight….
Just let us do our jobs asic.
ASIC IT IS NOT YOUR JOB TO WRITE LEGISLATION OR COMMENT ON IT YOUR ROLE IS TO REGULATE THE LAWS. STOP THE BACKWARDS ILL INFORMED AND CONFIRMATION BIASED INNACURATE OPINION AND OVERREACH YOU ARE A HUGE PART OF THE PROBLEM!!!!
$990,000,000 / 476,000 = $2,080 = Not that high
Where’s the forensic investigation of the millions and millions of member dollars being spent by the super fund Trustees?
Breach of the privacy policy we are supposed to adhere to…. who is to say the Trustee knows anything about financial planning advice/the client’s situation, do they have all the same qualifications we have? ADD MORE COST and DIFFICULTY to an already messy maze of compliance rules and changes.
70% of advice fees are high because of poor red tape regulations and increasing ASIC levies…?
“She added that ASIC is particularly concerned about advice that is stemming from high-pressure sales tactics.”
So rather than doing their job by going after these types of practices, which were reported to them at least 10 years ago. They would rather take a sledgehammer and smack every adviser over the head with it, to make it as difficult as possible for the adviser to be paid.
“Australian Securities and Investments Commission (ASIC) has called on superannuation trustees to “renew efforts to protect members from unscrupulous operators amid evidence of inadequate oversight of advice fee deductions”.
Doesn’t this just echo what was said in the recent Treasury round-table, which the AIOFP took issue with. Then ASIC go and deny they ever said that. Liars with a culture problem! Every Adviser is unscrupulous apparently.
70% of advice fees deducted were more than $15,000 a year. That couldn’t be true, surely.
70% of trustees had approved fees of more than $15k. It just reads really poorly
“over $990 million in advice fees charged across more than 476,000 member accounts”
What point is ASIC trying to make here?
$990M split between split between 14,000 is around $71K pa – is ASIC saying this is high?
$990M split between 476,000 members is around $2K pa – is ASIC saying this is high?
$2,079 per member, seems about right to me. There is no gouging there.
Oh, but Stephen Jones said that Trustees would not need to check advice…?
Back on the merry go ’round we go.
It always interests me when ASIC talks about how unscrupulous the advice sector is. Important facts that have been omitted here when they talk about $15,000 fees, like the actual balances held by these members, the gravity of advice, whether it included advice and ongoing services.
Every time they open their mouths, or issue another short-sighted report, they come across like complete remedials. Have they ever considered that the higher advice fees are directly correlated to the added regulation, Regulation fees, increasing licensee fees, inflation, etc.
You need to do better ASIC.
Seems ASIC is no longer trying to hide their true role – running a protection racket for Industry Super?
so true
If I supplied an advice document (SoA) redacted or otherwise, how would I not be in breach of the Privacy Act ?
Why would an 18 year old back office flunky have greater authority than me in relation to a fee arrangement between me and my client ?
And who else gets to read it. And they get to see every other asset they have. Its complete nil privacy. And how do you know its not outsourced to India. There is all sorts of vulnerability in this.
I don’t understand why ASIC is even interfering with advice fees and super accounts – if the member agrees to and upfront and/or ongoing advice fee being deducted from their super accounts then what has that got to do with ASIC or the super trustee?? The member is big enough and old enough to make their own decision and deal with the benefits or consequences that stem from their decisions. Typical communist mentality.
ASIC is appointing the super funds as their deputy, to go and start regulating advice documents. What could possibly go wrong? Another layer of regulation, another layer of compliance. Giving the unqualified perpetrators oversight powers of honest Financial Advisers who have to have a degree, exam and professional year of training. But their advice is now subject to the scrutiny of some unskilled, unqualified and uneducated superfund flunkie?
here we go.
ASIC back peddling to fall into line as a regulator to protect the industry funds.
Spot on!