Scott Hartley has joined advisers in calling for amendments to the proposed change to Section 99FA of the Superannuation Industry (Supervision) Act 1993, which has become another painful issue for advisers despite being part of the tranche of the Quality of Advice Review-inspired reforms intended to reduce the regulatory burden.
Earlier this week, ifa reported that a letter has been distributed to advisers by adviser networks for onward transmission to their parliamentary representatives to protest the government’s mismanagement of advice legislation and regulation.
The letter highlights several issues, including the aforementioned bill suggesting trustees would be required to review clients’ Statements of Advice (SOAs) before they can satisfy members’ requests for payment of advice.
The letter suggests that this part of the bill tries to covertly restrict advice fee payments from superannuation, potentially impeding access to quality financial advice and raising costs, despite its professed goal of reducing red tape and promoting affordable advice.
“The amendments introduce substantial administrative burdens, requiring superannuation funds to rigorously assess the member’s justification for advice payments and the proportionality of fees. This subjective process duplicates AFSL responsibilities and increases costs for all members,” the letter reads.
Both the Financial Advice Association Australia (FAAA) and the Financial Services Council (FSC) have called for explicit changes to the bill’s provisions to ensure the regulatory burden on trustees and advisers does not increase.
The Minister for Financial Services, Stephen Jones, has clarified that it was not his intention to create additional checks. Instead, he has insisted that the policy intent was simply to continue current practices – a risk-based sampling approach.
Speaking at ifa’s Adviser Innovation Summit on Tuesday, Sarah Abood, CEO of the FAAA, shared that the government has amended the bill’s explanatory memorandum (EM) to clarify that it does not require a rigorous review of each SOA. However, she noted that maintaining the bill in its current form means the issue persists.
The concern is that if the wording remains unchanged, some trustees may interpret it as requiring more rigorous checks, thereby adding unnecessary red tape to the process.
“Our strong preference is that these changes be made in the law itself because it’s challenging practically to always have to read the EM,” Abood said.
“We think it would be far clearer and more explicit to make that change in the legislation itself and we continue to argue for it.”
Her words were echoed by Hartley on Thursday, who said in a statement: “We acknowledge amendments the government has made to the bill’s Supplementary Explanatory Memorandum. However, this does not resolve the issue with the current drafting which may place an undue burden on superannuation trustees before they are able to satisfy members requests for payment of advice – a burden which may ultimately lead to higher costs for superannuation members.
“Financial advisers play a key role in helping Australians manage their financial outcomes and we encourage the government to recognise the importance of accessible and affordable advice.”
Abood highlighted that if the legislation remains unchanged, according to a study conducted by the Licensee Leadership Forum, it will cost advisers “north of $400” per piece of advice to manually redact an SOA before it can be forwarded to the super trustee for approval. This process, she said, would be necessary to meet privacy obligations.
“Privacy law dictates that we can’t disclose information that clients have disclosed to us, and that’s a manual process,” Abood said.
“So that’s pretty frustrating for advisers, and that’s what we’re worried about.”
Based on the results of a recent ifa poll, advisers are overwhelming worried by the proposed changes to s99FA of the SIS Act.
Asked whether they are concerned about super fund trustees being required to review SOAs, 86.2 per cent of the 217 respondents said they are, while just 11.5 per cent were unconcerned, and 2.3 per cent were unsure.
The Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 (Bill) is under consideration by the Senate economics legislation committee, with a public hearing scheduled for 13 June 2024.
