AFA general manager of policy and professionalism, Phil Anderson, told ifa that the measures – which allowed super release advice costing up to $300 to be given without an SOA – were a logical step for the regulator considering the large numbers of consumers in financial stress as a result of the COVID-19 crisis.
“We are conscious of the large number of people that are impacted by this and we are obviously very conscious of what is a realistic charge for advice on this,” Mr Anderson said.
“If you’re only getting $10,000 out of super, it’s not practical for a charge of anything greater than the figure [ASIC] have landed on to be applied, but it’s very difficult to provide advice at that fee level.
“If it’s new clients it’s going to be tough for an adviser to have someone walk in off the street and say ‘I need advice on whether I should get super out’ – if they are going to provide personal advice, they need to find out their personal circumstances and that is a costly exercise.”
Mr Anderson said given these circumstances, it was sensible for regulatory relief to also be extended to accountants and intra-fund advisers, despite the fact they were not ordinarily licensed to provide full personal advice.
“We are not overly uncomfortable about it being extended to tax agents who will already have some knowledge of the client, including their cash flow and so on,” he said.
“There’s a no-action statement [in the measures] to give certainty to super funds giving that advice because they are another potential supplier of that advice.
“At the end of the day, whilst we would always be opposed in normal circumstances to anyone being able to provide advice when they are not authorised, in the current circumstances it’s a reasonable measure to ensure as many people as possible can get access to some form of advice.”
Mr Anderson added while the measures were not economically viable for most advisers, many could still choose to take up the provision of low-cost super release advice as a pro bono community service.
Industry welcomes red tape removal
A number of other financial services industry bodies have welcomed the regulatory relief measures, which were announced yesterday and also include further time to provide SOAs to a client after time-critical advice is given, and the use of an ROA for existing clients whose circumstances have changed or who are seeing a different adviser within the practice.
“There has been an increasing demand for advice around early access to super since the government announced Australians could access up to two parcels of $10,000 in superannuation tax-free as part of their second stimulus package,” the joint bodies said.
“This move has removed significant red tape and ensured a simple, streamlined process is in place so those facing financial hardship during this time get the right advice.”
SMSF Association chief executive John Maroney said given the effect that early super access could have on a client’s financial goals, it was important they be able to speak to their adviser before potentially accessing the funds.
“The decision to access superannuation early is a significant one with a long-term impact on individuals’ retirement savings, so for them to be able to speak to an accountant or adviser for a small fee to get the advice they need without sacrificing safeguards is welcomed,” Mr Maroney said.
FPA chief executive Dante De Gori said the move would provide more comfort to consumers in knowing they could consult an adviser before signing up to the early access scheme.
“This is welcome and timely relief from ASIC to assist our members in supporting as many Australian’s as possible through the financial crisis caused by this pandemic, and demonstrates ASIC acting on sensible calls from professional associations,” Mr De Gori said.
[b]Here’s a novel idea[/b][b][/b]: Since ASIC appear to have so many issues with Advice and the documentation of it, why don’t they produce a form/booklet that requires us to fill in certain fields and answer certain questions. As long as these are completed IN FULL it’s compliant because they could put whatever requirements they have in it. This way they ensure they’re getting every Adviser around the country to provide what they desire of us. Advisers can then attach as an appendix any additional cashflows or calculations for the clients. The costs would be reduced to us and therefore to clients, and the clients would receive much more timely advice and wouldn’t be paying for documents they don’t want, or see any value in.
Absolutely fantastic idea but won’t happen. You know why. Because ASIC will actually have to do some work. They will have to actually understand the real life implications of the rules they enforce, the client relationship and provide a workable solution around the BID farce. Something no one has been able to do as far.
I don’t think SoA relief will help a lot of Australians, cause Australians stop being able to afford Financial Advice about ten years ago and it’s reflected in Centrelink lines.
Hi Mr Bank Planner. I’m pregnant with 3 kids and my Husband lost his job and we’re 3 payments behind on the house repayments and we’ve got $8,000 owing on the credit card. I want him to sell the JetSki but he won’t have a bar of it, cause it goes nicely with the $80,000 Ute and I’m certainly not cancelling the netflix subscription and so he’s got $20,000 with Hostplus. Could you help us fill out the form? What you don’t have planners anymore Westpac. Oh..
The release states, [i]ASIC will conduct surveillance activities to monitor the advice provided under this relief, to ensure that advisers, registered tax agents and superannuation trustees are acting in the interests of their clients and members.[/i][i][/i]
Even if the client is crying that he lost his job and his wife is pregnant and they can’t pay the rent….That means if you forget to cross the t and dot the i, the whole work will be a fail and your name will be on a press release saying you provided inappropriate advice. Not worth the $300 effort or the time spent doing the invoice or getting consent to pay the $300.
Maybe ASIC could provide the advice for super withdrawals!!!!
Pity it wasn’t extended to advice on the the reduced Pension Minimums.
what advice is needed?
client: i’m desperate i need $10k out of my super fund. I can’t feed my kids.
super fund : This law permits me to give you your own $10k before retirement in this case. This will impact your retirement, you will have less money at that time. Are you sure you have no other option?
client: i have no other option, i am desperate, i am out of work, i’m going to lose my house.
super fund: well ok then. In order to cover all of our arses please go and spend a further $300 on some advice to confirm that.
what advice is there to give? sure, we could try to quantify the loss of retirement income, but what is the point? People have no other option! we could help them choose which fund is least worst to take their money from. we can point out fees. but what’s the point? If people have no other choices then it is what it is?
Nice one Ann, although I reckon it will go more like this….
Ring ring
Client: hello this is Mr client speaking
Adviser (AKA industry fund retention officer): Hi Mr client, I noticed you have requested an early release from your super. I have run some projections and I estimate this will cost you $200K+ by the time you retire, because our unlisted assets in office towers, airports and retail shops will keep growing at 10%+ every year, despite the inescapable truth that the valuations will be hammered by eventual increases in the risk-free-rate and the reduction in demand from tenants, which will last many years beyond the pandemic. I know this because I am a licensed financial adviser and I don’t get commissions, so my advice is 100% independent (cough, cough)
Client: I can’t pay my rent, I have lost my job
Adviser: Ok, in that case we will waive the usual fee of $300 fee for financial advice, because we love you and we care about you more than life itself. Let’s see if I can help you avoid the withdrawal from your super, by exploring any and every possible option. Have you though about robbing a bank like on the movie ‘Fun with Dick and Jane’? They are nasty those banks.
Client: Look, it’s my money, can you please go ahead with the withdrawal, I already signed the paperwork
Adviser: Don’t you know we use your money to support businesses, provide jobs and support the economy? We are saints and without us, who else would fund the union movement, the Labor Party and lobby the government to destroy value in the shares you hold in the big banks? It would be un-Australian to withdraw your money
Client: But the realestate agent and my accountant said I could $20K from my super, that would really help right now
Adviser: Don’t worry, the police are on their way right now to arrest the property agent and your accountant has been reported to the TPB, as I have just recorded the conversation and reported them
Client: So is it not true that I can withdraw $20K?
Adviser: Yes, that’s the law, but why don’t you do your bit to help our noble cause and maybe reduce the withdrawal amount to just $5K? Consider the other $15K like a donation towards the bushfire appeal. We are going to use your super money to support the economy, preserve jobs, line our pockets, fund political research, lobby the Government to make changes which will make it impossible to get financial advice from anyone but your super fund, sponsor football clubs and advertisements, ahem sorry, I lost the script for a moment there – I mean, taking your money out of the fund at this time would be entirely unethical, my qualified opinion is that we should tear up the withdrawal request
Client: Can I please just have my money
Adviser: Look, I’m going to level with you – we don’t have enough cash, we spent your money on assets that no-one else wants right now and we are desperately hoping no-one notices, or else there will be a run on the fund and when it collapses it will be a major embarrassment for the honest, ethical, sustainable and all-round nice guys – the industry funds. We are like charities, butter wouldn’t melt in our mouth. Think of us like the financial version of Mother Theresa – now you wouldn’t….
Client: click…beep, beep, beep
Adviser: hello Mr client….are you there….Mr client? Damn, another one bites the dust, there goes my retention bonus. Better get my own money out of the fund before this thing freezes…
???
Depends what you make of it. You advertise that you are providing this for $300. All you do is establish their eligibility, provide them with a Record of Advice that explains how they do it, the benefits and the consequences. Everything else is scoped out. Next time this person wants to see an adviser (could be 5 years down the track) they remember that when they needed someone, you stepped up so they come and see you.
Sometimes playing the long game is the way to go especially for younger advisers.
Except that in 5 years time they will expect full advice for $300 not the $3 – 5k it will actually cost.
Not if you do your job properly and make it clear this is a special rate due to COVID-19 and the specific nature of the advice and explain to them how you charge for normal services. You could provide that information as well, the opportunities are there, you just have to have an open mind about it all.
My mind id open. I have seen this before. They will not remember or will not care to remember how special COVID-19 really is.
Please do not devalue YOUR value.
You cannot provide an ROA to a new client… Asic still expect an SOA after the fact with full evidence and research. Good luck with that
In the majority of cases, any advice will be of little consequence. we need to remember the two rules of investing.
“Fear and Greed”, right now Fear is the only driving motivator for many, those who are most vulnerable will not be interested in any advice which recommends they stay put, a “Bird in the Hand” will be their driving motivation, and any suggestion that if not needed the funds will be returned will evaporate for the above reason. I suspect in a lot of cases, the money will actually go toward meaningful expenses, like renovations while in lock down etc.
this is a blip on the superannuation map, and it wont bode well for those who decide in haste, it will have a devastating long term effect on their retirement income. for many this will end in tears.
the ASIC concession is IMHO a poor attempt at solidarity with the very industry it is trying to destroy. there needs to be a much more equitable approach to statements of advice, specifically for small risk only advice, most of our clients are now either going to have to pay a fee in addition to the advice or not receive any further advice from us, neither is an ideal option, and as usual ASIC has thrown the baby out with the bath water .
I’ve had enough of De Gori. What a load of BS. This so-called ‘relief’ is nothing more than a free pass for industry fund retention officers to coerce their members into dropping their early release requests under the disguise of advice, in a desperate attempt to save their funds from collapsing. There is nothing there for professional financial advisers who are working ridiculous hours helping their clients with proper financial advice during this crisis, weighed down by the compliance nightmare created by ASIC. To suggest otherwise shows this guy has completely lost touch with financial advice in this country.
absolutely right Ben – I dont think in reality many will be taking this up with their incumbent planner, and I wouldn’t be providing that kind of advice for $300…at best that’s 2 hours worth of work??? reckon it can be done in that time? Having said that I encourage (and suspect stacks of it is going on already) pro bono help and guidance at this time for people you can see need some help…
If ASIC thinks planners can provide advice for $300, even with these supposed cut down requirements it shows how truly out of touch they are with the real world.
Yep because no one in ASIC has ever been through proper financial advice, nor anyone in Government, so they have ZERO idea of the masses of BS STRANGULATION by REGS they have created.
No Real World Financial Advice Experience !!!
Yeah I agree, why not charge the client $1,000 to access $10,000. A bit like the good old days when Agri-business and Hedge funds would pay 10% commission. Would that make you happy?
I don’t think that would make anyone happy Mathew. But what would make a lot of people happy is removing the enormous regulatory overheads that make it so hard for advisers to provide affordable professional advice. The recent announcement by ASIC does very little to address that problem.
I think what the’s saying is you simply decline to provide. $300 is half the cost of an outsourced paraplanner
Clearly i’m not saying that. ASIC and the legislators keep demonstrating a complete lack of understanding of the cost to provide advice under the rules they have created. We would like to help every client however as a business we can’t afford to deal with clients in this scenario. If we did we will be out of business and applying for $10,000 out of our super too!
Indeed we would…as would our staff!
To complete your tax return a tax agent needs to know 100% of what your income was. The only expenditure they need to know about is what’s deductible. To infer that because a tax agent has completed an individual’s tax return, they would know what their cashflow is like, is incorrect.