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AIOFP says s99FA changes don’t line up with QAR recommendations

AIOFP technical chair Lionel Rodrigues says trustee discretion on advice fees was “not the intent” of Michelle Levy’s final QAR report.

Speaking at a Vanguard event in Sydney on Tuesday, Financial Services Minister Stephen Jones 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, Association of Independently Owned Financial Professionals (AIOFP) chair of technical services Lionel Rodrigues argued that the government has not adequately addressed recommendation seven of the QAR.

“The issue of payment of advice fee from a superannuation account was canvassed by the QAR, released in December 2022,” Rodrigues said.

“Here the reviewer adopted the strict legal approach that such fees may contravene s62 of SIS (Sole Purpose Test) and there were doubts raised as to the legality of advice fees deducted from a superannuation funds (‘a member’s interest’) and the liability of superannuation trustees to pay such advice fees.”


Recommendation seven of the QAR stated that “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 a member’s interest in the fund on the direction of the member”.

Importantly, it also stated that the objective of the recommendation is to “provide superannuation trustees with more certainty, about paying advice fees agreed between a member and a financial adviser”, while also noting that “the SIS Act would authorise the trustee to pay an advice fee, including an ongoing advice fee, on the direction of the member”.

Levy also recommended that section 99FA of the SIS Act “be repealed and replaced with a provision giving trustees permission to pay, on the direction of a member, a fee for advice”.

Rodrigues said that, in his professional opinion, it was not Levy’s intent that “superannuation trustees have any discretion upon the direction of the member”.

“I have submitted that superannuation trustees are not qualified to assess superannuation financial advice as to a ‘member’s interest’ and they do not wish to accept the liability to make such decisions,” he said.

“For the professional adviser, there are issues with breaches of privacy laws concurrent with breaches of the Code of Ethics under s921 of the Corporations Act.”

He added that it is “regrettable” that the minister has not adopted this part of the QAR recommendation.

“The QAR reviewer recommended a repeal of s99FA SIS. This has not happened. Changes to s99FA SIS have not reduced legislative uncertainty. This is compounded by pronouncements by ASIC and APRA,” Rodrigues said.

“The repeal of s99FA would have been concise and provided superannuation trustees, superannuation members and the professional financial adviser the statutory clarity desirable amongst a myriad of compliance requirements.”