The two regulators released a letter they had distributed to super trustees on Wednesday, outlining expectations on the back of the Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 coming into force.
ASIC and APRA said they would be “monitoring trustees’ adherence to the legislative requirements and ASIC instruments’ requirements once they commence”.
“In making payments out of a superannuation fund it is expected that trustees will have processes in place to ensure expenditure is appropriate,” the regulators said.
“In relation to advice fees, the design of specific oversight practices will depend on the advice service model that superannuation funds offer to members.”
APRA and ASIC said while it was not the job of trustees to “make a detailed evaluation of the specific professional advice provided by the financial adviser… trustees who have an understanding of the nature of the business model of the financial adviser will be better placed to implement robust and efficient assurance steps” with regard to the new laws.
“In circumstances where the trustee is not providing financial advice itself, the trustee’s role is to have controls in place in relation to payments made from the fund for advice services,” the regulators said.
APRA and ASIC referred back to their previous correspondence with trustees around fee consents issued after the royal commission’s final report in early 2019, where a review had been conducted of trustees’ oversight processes with regard to advice fee deductions.
“Our review identified a wide range of practices in relation to the extent of reliance on consents and attestations, from some trustees relying solely on financial adviser attestations that advice has been provided, through to others who will not pay financial advisers without clear evidence of member consent,” the regulators said.
While advisers were now legally obligated to provide evidence of consent to trustees, ASIC and APRA said that “over-reliance” on fee consent forms alone “should be avoided”.
“Instead reliance on the consent should be combined with further trustee oversight practices, in particular, proactive reviews of a sample of SOAs and/or related documents to evidence the provision of services, either where misconduct is suspected or as part of a regular review,” the regulators said.
“While member written consent shows that fees have been properly consented to, reviews of SOAs and other documents for a sample of members provide a further assurance that the expected services have been provided in respect of those fees.”
The fascinating part of this letter is that the regulator wants to load up the super trustees with liability that is not based on legislation.
If a trustee vetted an SoA then the client can sue the trustee in addition to the adviser for dereliction of duty.
A clear case of ideology over common sense or any interest in serving the public.
Just when you think the red-tape strangulation could get any more out of control, ASIC and APRA dream up a new way to waste the precious time of financial planners.
This is crazy. Talk about double ups in admin. Also SOAs contain confidential and private information. This shouldn’t be shared with a platform provider.
As long as there is explicit consent from the client then there is no issue.
LOL,
So now along with my annual audit, I will now get audited by each and every super fund we recommend. Creates a strong incentive to work with one fund only.
We currently have clients across the spectrum of industry and retail across many providers. With Best Interest forefront of mind this is the result of years of advising where if the clients current fund can adequately meet their needs we wouldn’t change. Our auditors currently test the files they audit for advice thats compliant with sole purpose test. So either the super fund trustees accept that, or they each do their own audit of our files. If this means we get 20 different audits each year. Its not hard to see our business model changing. We either increase fees to clients to cover excessive audits or we consolidate clients into a few providers. In reality we will give clients the choice. Move to a preferred fund, or pay us more for sticking with a non-preferred fund as we need to cover our costs of each trustee auditing us.
Regulators…. find some business-sense in your decisions or understand that you are making advice unaffordable for those that need it most.
This is why I don’t use industry super funds. Simple. We have seen examples where they have asked for SOA’s and then questioned the advice, which should be mutually exclusive to the proportion of advice that relates to their fund to provide for the fee. This is from people who are not qualified to have a view on my advice, they are administrators, not advisers. Easier to simply not use industry funds.
So what are you going to do now retail funds have to do the same thing?
So what happens when a retail fund asks the same questions about apportionment? (Because they are legally obliged to)
ASIC and APRA have missed an opportunity here. They should be dictating that the following forms are also required. Client consent to provide fee consent form. Client consent to provide SoA to Trustee form. Client consent to provide consent digitally. Client consent to concent to concent form. But the best one should be Client consent to Intra Fund advice fees to be charged to client account when no advice has been provided. This form should be provided along with the exact $ fee charged (Trustees will need to add all Intra fund advissers salaries/overheads and divide by number of members) as well as a projection of the impact of these costs on their end retirement benefit.
Not forgetting that they need to accurately project all fees 12 months in advance taking into account El nino, Covid, market crashes, government stupid ideas, and many other events…
This will just lead to further vertical integration as a more understanding MDA trustee aligned to the dealer group will pass over such obstacles more easily. MDA trustees wont want to rock the boat (or bite the hand that feeds) and indemnity agreements will flourish. Wake up ASIC you keep creating bigger fires to put out.
I will be sending the request to client and asking for their approval before i send an soa
in. If they approve there will be another fee given to client and authority to draw from their super fund. They will get a redacted SoA from me to protect their privacy. If they decline i will direct them to super funds complaint line.
More red tape that costs clients money.
this isn’t new team
Trustees have a fiduciary obligation to ensure the Sole purpose test has been adhered to when allowing a fee to be deducted from a client’s account (this is not a new law). This has been in the works for a while now. Nothing to fear here!
Hayne’s reco re this did not include trustees creating a new consent form for this – it was supposed to be the doc, CSA or similar, currently used by the practice!! This whole thing has been a coordinated effort by institutional trustees and arranged via “behind closed doors” meetings to further diminish adviser numbers.
The spiral continues unabated……
This is why financial advice must be added as an ancilliary purpose. There is no reason not to do this.
This is ideological and like all such things it will create a lot of damage before the instigators are forced to stop.
ASIC and APRA illustrate how idiotic they consider Australians to be. We have Annual Opt-Ins, if the clients aren’t receiving a service then they won’t opt-in. There is no need for Big Brother to get involved.
Talk about the Nanny State. Control your attack dogs Josh Frydenberg.
so…. the trustee shouldn’t meet their SPT obligations then?
Does it for Intra Fund?
intra fund means “within the fund” so…. ahhh… yeah?
Ah, no.
I would hazard a guess that the fund would be checking SOA’s to ensure SPT is being adhered to by their own advisers..
As an ex intrafund adviser I can confirm 10 SOA’s every month were checked to make sure that they were compliant.
The Trustee was probably only checking that you recommended the “in-house” product.
At the end of the day responsibility is with the Adviser, so is there a need to double up on legislation?
for super funds, it is also their responsibility to meet SPT, which is obviously much broader than advice fees.
Can we take Qantas shares instead of Advice Fees then?
So let’s say I give comprehensive advice across super / non-super issues and I determine that advice fee is 60% related to super fund advice (inc insurance via their super fund) and split my fee accordingly. On what basis do super trustees then decide whether the 60% split is appropriate? Do they have a formula? Is it universal accross all Trustees/APRA/ASIC? What measures are in place to manage the Trustees clear conflict of interest in making this determination? Are the Trustees required to hold the relevant education/FASEA requirements to make judgement on licenced financial advisers?
Hmmm, maybe if they stopped the political advertising, the union ‘consultation’ fee rorting, the ‘spotters’ fees/commissions, the in-house deals, the union construction force only mandate on major building projects, the over-priced to construct/over-valued ‘unlisted’ assets, the issues around transparency on valuations (esp listed assets that are placed at a value by accounting firms as opposed to the stock exchange they’re listed on!) and then all the intra-fund advice fees that members never receive any benefit or advice from; perhaps then I could even remotely take your comment about SPT obligations as even one iota of concern by these ‘trustees’.,
Not a nanny state, just a focussed effort to further reduce our numbers and opposition to the mega-giant union industry funds controlling the trillions in super and by default massive positions in major companies so they can further control/manipulate things to their own advantage (not members).
Anyone else concerned about how the ACCC doesn’t care how much union super controls in assets/companies/infrastructure (the offer on SYD is a concern!) and the corrupt regulators encourage merging of mega-funds, and yet if it were private enterprise, the ACCC would be stopping these deals going ahead?
So let me get this straight.. the regulator is pushing up ASIC fees, red tape costs, PI insurance and forcing planners out, thereby creating a supply/demand dilemma.
They now want trustees to validate fees charged and service delivered.
Has there ever been industry persecuted in this way??
that’s the legislator, not the regulator.
Rubbish it’s the Regulators INTERPRETATION and direction on enforcement.
Where in the legislation does it say Trustees must get SoA’s and be a complete 2nd layer of AFSL compliance ?
ASIC say lets make Advice more Affordable = CRAZY BS OVER REGULATION and COSTS !!!!!!!
ASIC needs a full clean out. Ms PRESS, must go.
ASIC Adviser persecution continues. Yep get tough on Real Advisers and real fees already disclosed 5 times.
At the same time ASIC want to keep expanding the Hidden Commissions of Intra Fund Advice, conflicted, vetically integrated sales all paid for by Undisclosed Hidden Commissions.
[b]Real Advisers must demand a level playing field.[/b] Real Adviser persecution is beyond a joke.
Why is the cost of advice rising…….“While member written consent shows that fees have been properly consented to, reviews of SOAs and other documents for a sample of members provide a further assurance that the expected services have been provided in respect of those fees.”
I have just started wading through the new rules to onboard clients, provide advice and be paid for me doing so.
11 forms in all and about 3 hours work and that’s not even including the fact find and client meeting.
I read another article on Professional Planner where the super trustees met to discuss providing intra fund retirement advice digitally.
I read another article from Lifespan regarding the huge number of Orphan clients about to be unleashed.
I am trying to stay as positive as i can but my business is stuffed, my income is stuffed, my retirement is stuffed without major changes to my business processes. I am lucky that i have passed the FASEA exam early but still have to become degree qualified.
Seriously, the only rollout the Government could get to work was the Sports Rorts and car Park scandal and they were full of great examples of ethics and morality and not littered with any conflicts of interests.
I have no choice but to keep going but seriously just thinking about walking away from my business, writing my reasonable business debt off to political risk and getting a salaried position doing something.
This is just an ill thought through and drafted piece of legislation.
You can become an intrafund adviser on $100,000 pa with no stress!
and a 9-5pm job too….but you’d need to say “why don’t we salary sacrifice into Super” 30 times a day to every possible scenario imaginable..
Well said. Anything to increase FUM – and get that free ticket to the Tennis – and a bonus.
“While member written consent shows that fees have been properly consented to, [b]reviews of SOAs[/b] and other documents for a sample of members provide a further assurance that the expected services have been provided in respect of those fees.”
So we provide wholistic advice to a client in an advice document and then a super trustee / their staff can see everything relating to a clients confidential goals / financial affairs. Surely that is a breach of the Privacy Act?
Imagine this scenario – a super trustee asks for a sample SoA then ticks it off as “satisfactory and compliant” and pays the fee. 2 years later the client is dissatisfied, for whatever reason, makes a complaint to AFCA and wins the case, as they are expected to do because AFCA always roll out the red carpet when it comes to consumer complaints. AFCA flag the SoA as “non compliant” and throws the adviser under the bus by making a breach report to ASIC. ASIC investigates the adviser and SoA and also agrees that the SoA was non-compliant. Will the super trustee also be responsible for not flagging the compliance breaches and reporting that to ASIC? Will ASIC also take action against the trustee for paying out the fee based on a non-compliant SoA? What a tangled mess this will all become!
The fiduciary obligation of the Trustee is to ensure the SPT has been adhered to before the releasing the funds. That is where the responsible ends in the eyes of the law.
Just like industry super and their donations, advertising, qantas points, advice teams…
Yeah Retail funds dont spend money on advertising or sponsorships….. Get on with it.
Indeed. Retail does intra fund also…
Well, just pay me with the money taken for Intra Fund Advice then – the members have already paid it seems. Why can’t advisers have that money?
I love asking twice to get paid once. It makes the entire advice process so much more affordable.
Meanwhile Industry Funds charge fee for no service.
Bloody amazing isn’t it – and we are the ones being forced to have ethic training, examinations in ethics, ongoing training in ethic and a code of ethic written for us.
the FASEA exam – I like to call it the “Communist re-education camp”. Makes sense that way.