The Super Members Council (SMC) has issued a statement in support of the proposed changes to Section 99FA of the Superannuation Industry (Supervision) Act 1993, which advice professionals have argued would only exasperate the red tape and therefore the cost of advice.
The changes proposed in the bill require funds to review clients’ statements of advice (SOAs) before they can satisfy members’ requests for payment of advice.
The SMC, which represents Australia’s largest funds, including AustralianSuper and Australian Retirement Trust, announced on Wednesday that it supports the bill in its entirety. Additionally, the council called for the tightening of anti-hawking laws to “stop dodgy financial advisers” from using cold-calling businesses to solicit clients.
It argued that “rip-off merchants” exploit a hole in anti-hawking legislation – which bans the unsolicited selling of financial products – to secure “exorbitant advice fees” from unsuspecting consumers, often charged from their super account.
“Reputable financial advisers do not rely on third parties to cold call Australians to sell their services and using cold call lead-generation for financial advice should be banned,” said SMC CEO Misha Schubert.
“These groups use clickbait-style social media posts, cold calls and high-pressure sales tactics to convince people to change super funds. Super fund members are then charged a massive advice fee and plonked into a poorer performing super product. This predatory practice needs to end.”
The SMC referenced the Australian Securities and Investments Commission’s (ASIC) recent report to support its argument, noting that the “shonks” mentioned in the report, who persuade clients into inappropriate super switching through cold calling and high-pressure sales tactics, could be eliminated if super funds are required to monitor and scrutinise SOAs.
“One of the ways these shonks can be caught is by super funds checking if advice fees are appropriate,” said Schubert.
“To give the regulator the teeth it needs to end the rip-offs, anti-hawking legislation should be extended to also ban the unsolicited selling of financial services.”
The timing of the ASIC report was deemed suspect by the advice profession given the heightened scrutiny surrounding the initial Delivering Better Financial Outcomes bill and the subsequent Senate inquiry. The inquiry, in particular, has seen the bulk of the focus placed on the suggested revision of requirements for superannuation fund trustees processing financial advice fees.
However, the SMC sees nothing wrong with the bill and further noted that the law should be passed “without delay and without being watered down”.
“Vital consumer protections that obligate super funds to check the appropriateness of advice charged from super needs to be swiftly legislated and not delayed or changed,” the CEO added.
Schubert insisted that although only a “small subset of advisers” use cold calling for lead generation, the issue is causing significant reputational damage to the entire financial advice industry.
“Australians should hang up on unsolicited calls offering to connect them to a financial adviser to review their super, as they likely lead to a shonky financial adviser,” Schubert said.
“While the regulator does crack down on individual advisers offering inappropriate advice after using cold calling lead generation, the practice of cold call lead generation selling financial advice is not yet banned.”
Advice professions demand change
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 last 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.”
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.
Very clever strategy to impact the business of Netwealth, Mac Bank, CFS, Hub24, AMP. The members of this organization are representing Super funds (apart from 1) that don’t work with advisers. Checking SOA is going to be costly, a great way to a) to get rid of advisors whilst b) damage your competitors.
I noticed they’re doing nothing to reduce the “exuberant fees” ….. So they’ve practically acknowledged Advice fees are “exuberant” but do nothing about it.
Concerns like this (no matter how relevant they are) are nothing to do about protecting Australians but all about protecting the honey pot.
Straight from Industry SuperFunds website under the heading of “Consolidate super”
” You wouldn’t pay to put two kitchens in your home, so why would you pay to have two (or more) super accounts? It sounds crazy, but many Australians are doing just that. Even though, right now, it is super easy to rollover all your super into one, low fee account and save money for retirement.
” That’s why its important to look at consolidating all your super into one account, so you are only paying one set of fees. Plus, you’ll have a lot less paperwork to worry about”
If this isn’t coercing people to make decisions they don’t fully understand by going online and completing a rollover form for every super fund to transfer into another, then what is.
They may not like to think this is technically “Hawking”, but it is subliminal, repetitive coercion in order to assume control of people’s super and build FUM.
They constantly emphasize how simple and easy it is to consolidate as they can do it themselves online.
This is incredibly dangerous and openly encourages people to make life changing financial decisions with little or no understanding of the impact.
“….inappropriate super switching…” assuming this is switching out of Industry Super Funds?
Cold calling is rubbish but so is a simple click and consolidate your super and lose all your insurance that the industry funds complaining in this article endorse. I also enjoy regular visits to CBUS Stadium but I am sure that is all done for the benefit of the members and not the directors / trustees. More self interested people making it hard to provide actual decent advice and shows why the trustees reading SOA’s will end up as a disaster.
Who are these cold calling operators and if their advice is crap, why aren’t they being investigated with vigour?
So, would this legislation allow Active Super the ability to be judge and jury?
What a crazy piece of legislation this seems to be?
Makes me ask myself, what is the FAAA/Sarah Abood up to?
The QAR was supposed to provide relief, but ASIC and Treasury couldn’t help themselves. They have poisoned the legislation to add further cost and red-tape; and these nonsense, unsubstantiated cold-calling claims are a shameful, low act.
So, once the SOA is lodged with the Trustee, how long does the Adviser have to wait for the trustee to approve the Advise is in the best interest of the member – assuming there is simply no point implementing before approval has been received in writing?
I don’t think checking the SOA is set up to be a gate to having the fee approved and paid. What they are after is a monitoring program to sample check SOAs – the same way an adviser would have files audited by a licensee. Picked at random and a sample only.
Well, if it is “the same way an adviser would have files audited by a licensee. Picked at random and a sample only” then what is the point – the Licensee already does this.
So why? If the trustee of a Super Fund decides a fee is not appropriate, it is basically saying the Advice itself is not in the best interest of the client the Trustees member right?
A trustee will likely always be able to provide the advice relating to the Members Super at a price below that being charged by a Financial Planner not being paid by a Trustee?
My understanding is they look to see if the fees are appropriate to be paid through Super.
ie. if you are doing budgeting work with the client, this shouldn’t be paid through Super.
Industry super funds are at it again with a renewed assault on financial advisers.
This is reminiscent of their highly successful “compare the pair” media blitz 10-15 years ago, which led to the banning of disclosed and agreed-upon investment product commissions, followed by the theft of grandfathered revenue rights. That campaign, backed by CHOICE, aimed to financially cripple the advice sector, and it succeeded, contributing significantly to the sector’s decline.
Now, they’re back with a multi-pronged attack, aided by ideological factions within ASIC, to further starve the sector of its primary funding source: fees from superannuation, which are commercially agreed upon between clients and their advisers. The SMC, led by former journalist and political editor Misha Schubert, is at the forefront of this effort. Schubert, a shrewd political and media operative, uses language designed to provoke and inflame:
“Rip-off merchants”
“Shonks”
“Cold calling”
“Dodgy financial advisers”
“Predatory”
These terms are premium headline catnip, crafted to generate outrage and support for their agenda. It’s clear that the same forces that attempted to ban fees from superannuation, and failed, are back with a more sophisticated and devious plan of attack. The financial advice industry must be vigilant and united in resisting these renewed efforts to undermine its viability.
It’s important to understand what 99FA is about. It’s about friction.
The aim is to pour enough sand into the system’s engine, to create enough friction (cost and risk) so that both advisers and trustees are scared off relying on those fees (advisers) or offering the option (trustees).
You have to give it to them, as a collective, they are impressively organized, something that cannot be said for the financial advice community, who to date have been sitting ducks for this lawfare.
It’s pretty simple and always has been. The Labor and union movement think they should be the sole providers of retirement savings vehicles because they legislated it and the enormous profits fund the Labor Party. Financial advisers are competition to them. Hence the over 30 years of this movement trying to get rid of their competition. Every, and I mean every, press release by the industry super movement is always in their own best interest. They want to legislate us out of existence and the evidence shows this.
It’s as simple as that.
From their website, the current directors of the SMC include:
Nicola Roxon (HESTA)
Beth Mohler (Australian Retirement Trust)
David Elia (ex-Host Plus)
Deanne Stewart (Aware Super)
Don Russell (Australian Super)
Wayne Swan (CBUS)
Sally McManus (ACTU)
You couldn’t ask for a more impartial and unbiased group of superannuation experts!!
The thing about this issue is that its been reported many times to ASIC by advisers, and what have they done?
ASIC know who these companies are, it’s not hard to find out, so why doesn’t ASIC actually scrutinise their licensees and advice files? You know, actually do their job!
Agree cold calling is bs, BUT where the hell is ANY relief or sensibility to help the 99.999%of Advisers doing the right thing? These advocacy groups are a HUGE part combined with ASIC overreaching to make laws instead of administering them and boffins in Treasury of why the legislation was written with huge ERRORS and unaligned with YEARS of industry consultation. The Government need to listen to practitioners – WHO represent under 3% of ALL AFCA complaints but fund this compliance economy of buffoons. DISGUSTING
If the proposal is that, in essence, financial services must self regulate (eg. Super funds checking SOAs to ensure appropriate advice/fees), and pay for each others bad behaviours (CSLR) why do we need to fund ASIC at all.
Very good point?
What would be the educational requirement for the employee of the trustee that reviews the SoA?
Should be a graduate diploma.
Nope – same qualifications are we are required including passing the adviser exam. Apples for apples. I don’t want some snotty nosed kid with a fresh Grad Dip & zero face to face experience checking SoA’s to determine if they meet clients objectives & offer value for money. Its an absolute circus.
Any adviser that hands over a client’s SoA to a super fund is breaching the Privacy Act.
The legislation is unworkable, and has been deliberately designed that way. It is intended to block members from paying for professional advice from their super fund, but has been dressed up as an “improving advice affordability” measure. Jones is a fraud.
On the SMC’s website they have a section titled ” Cutting Red Tape to help Retirees “.
This should do it then !!!!!
The industry funds are determined to drive the wedge deeper between them and Financial Planners. Trustees checking SOAs will not work, and only add additional costs to the client. It is the responsibility of the licensee to check the suitability of advice, and always has been.
What are the adviser associations doing about this indirect attack on the quality of advice? What is the case if an Industry Super Fund or Retail Fund disagrees with the advice and later, the client suffers a loss? Do they (the client) have the right to sue the adviser because they could not implement the advice due to lack of payment by the client because the client’s superfund refused to allow payment for the advice?
I wonder if the so called SMC ( Super Members Council ) would like to make comment on the issue of Industry Super Fund Directors, re-directing their fees to Trade Union and Labor Party associated organisations to the tune of tens & tens of millions of dollars over the last couple of decades ????
If they are representing members, would they not argue that if Industry Fund Directors do not wish to retain or receive their fees, they hold those fees within the fund for the benefit of their members ?
Whilst they are at it, they may wish to make comment on how Industry Super Funds such as HostPlus can spend millions and millions of dollars on sporting club or sporting organisation sponsorship and qualify exactly what direct benefit that expenditure delivers to their member’s retirement outcome ???
Nice Melbourne Storm.
How surprising….did Minister Jones scribe this for them???
Many of the directors of this SMC are his ALP mates, so it wouldn’t be surprising.