If financial advice was really a priority for Australia (which it clearly isn’t) the law would permit us to pay for advice using our super. And by that, I mean for any form of financial advice — not just advice related to our super.
But this isn’t the case. And while the Quality of Advice Review (QAR) has recommended some changes to the SIS Act in this regard, they aren’t exactly sweeping reforms that would make advice accessible to the masses.
Recommendation seven states 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 the member’s interest in the fund on the direction of the member.
“The objective of this recommendation is to provide superannuation fund trustees with more certainty about paying advice fees agreed between a member and their financial adviser from the member’s superannuation account and ensure that adviser fees are not paid in breach of the SIS Act and are not taxable benefits for members,” it states.
Ms Levy notes in her final report that the idea of expanding this agreement has been suggested by a few corners of the financial advice community.
“Some people have told us that advice fees, particularly ongoing advice fees, should not be paid from superannuation at all. Other people have suggested that superannuation might be an appropriate place to fund financial advice generally,” she said.
The report also notes that for approximately 60 per cent of advisers, the majority of the fees they charge are deducted from a financial product, and more often than not from a superannuation fund account.
“Good financial advice can add to a person’s retirement income, and it is appropriate that people should be able to apply some of their superannuation to the cost of receiving financial advice about their superannuation, including their retirement income,” Ms Levy said.
“However, I am not persuaded that superannuation should be available to pay for broader financial advice.”
It’s odd that Ms Levy couldn’t be persuaded that super should be available to pay for broader advice, given that it has been used as a convenient kitty for many other reasons.
Back in 2020, the Morrison government made the controversial decision to allow Australians to dip into their super as a form of COVID-19 support. This was on top of an aggressive bond buying program, an official cash rate of 10 basis points, JobKeeper, and God knows how many other inflationary schemes.
The federal government basically allowed us to use our super fund as an ATM, with little to no governance, and make withdrawals up to $10,000. All because of a virus (that most people are still catching by the way, despite their 42nd jab).
Between April and June 2020, Australians collectively withdrew $20.1 billion from their super. I know for a fact that many people did so for no good reason at all — just because they could. And why not? It’s our money after all. I wish the ATO the best of luck trying to track down where that money went.
The First Home Super Saver Scheme is another example of how super has been used for reasons beyond retirement. In its submission to the QAR, the Association of Independently Owned Financial Professionals (AIOFP) argued that the scheme for home deposits provide precedent for the use of superannuation in this way and the modification of the sole purpose test.
Yet there are no recommendations made by Ms Levy that would allow me to use my super to pay for financial advice more broadly. Not unless the advice being provided relates specifically to my super funds. In which case I’ll probably just go directly to my super fund, which I suppose is the whole point.
Personally, I believe the QAR missed a major opportunity to make advice accessible and affordable here. If Australians could use their super to pay for any type of financial advice, they most certainly would. Just look at how quickly we jumped at the opportunity to blow $20 billion of our retirement fund during the pandemic.
“Some people have told us that advice fees, particularly ongoing advice fees, should not be paid from superannuation at all.”
These “people” wouldn’t happen to be Industry Super fund trustees would they Michelle? They seem more interested in protecting their FUM than allowing their members to pay for advice strategies which help to protect and grow their wealth…
“It’s odd that Ms Levy couldn’t be persuaded that super should be available to pay for broader advice, given that it has been used as a convenient kitty for many other reasons.”
What does this tell you though about Ms Levy? She only wants Super Funds to benefit from her recommendations.
In addition, why is it so easy to pay for dental treatment, breast implants, fertility treatment, straight from super? Companies are out there actively advertising that people can use their super to pay for their treatment. They have no problems accessing the super for this, without any financial advice or licensing requirements either. Yet, if an Adviser wants to be paid from super, it’s a massive hassle, often met with “sole purpose test, blah, blah.” I don’t see super trustees scrutinising these payments like they do with payments to Advisers! So why can these companies access peoples super for their own benefit when it has nothing to do with the sole purpose test?
Yet another example of Adviser being treated like children or criminals.
Let me assure you, the government of today is only concerned with the objectives of the Unions and Industry funds. Besides the access for other reasons there are hundreds of millions channelled from Industry Super Funds through the back door to Unions for political advertising and Labor Party spending at voting / poll times. Financial Advisers are considered competition to industry fund member money. We Financial Planners are hated and maligned by this group, the Labor Party, Unions and Industry Funds. Their goal is to wipe the financial planning profession off the face of the earth. Nothing good will come from the FAR review. The only beneficiaries will be the Industry Funds and as a consequence the Labor Party and Unions.
The fee being paid from super to ‘a Financial Adviser’ does not mean in Ms Levy’s case, any one of we self-employed or Licensee employed Advisers. She clearly had in mind ONLY Advisers employed by a Super Fund. It is doubtful that any of the super funds will even approve an authority signed by a member to pay an Adviser who is not one of theirs. The only time this will happen is where an Adviser is already looking after an smsf and the Trustees have approved fee arrangements with their Adviser. If the Industry Funds are somehow pressured to pay other than their own Advisers, you can bet the ID and other red tape, elongated processes they impose will be so extreme the ‘outside’ Adviser will simply say it’s not worth the extra few hours work.
But wait, Ms Levy is ALL for using Your Super to pay for Industry Super Funds to COLLECTIVELY charge every member HIDDEN COMMISSION for so called General or Intra Fund Sales / Advice when 90% of ISA Members get NO Service for this HIDDEN COMMISSION.
It’s obviously fine for Industry Super to $$$$$ dip into Your Super honey pot to pay for their corporate boxes at the MCG and pay for their Intra Fund Sales teams. But oh no, Ms Levy it wouldn’t be wise to allow Real Advisers to be paid for Real Advice from the same Industry Super.
WHERE IS THE ADVICE LEVEL PLAYING FIELD MS LEVY ???
Totally agree with your facts..! The current SIS Act’s sole purpose test is so out of date and archaic and redundant. The purpose of advice, is to create wealth whether that be, via super or outside super, either way it will provide for retirement in the end! Any form of financial advice ultimately results in a better financial future, which results in self funding, or part funding your retirement. Its crazy, Australians should be able to use their super to pay for any type of financial advice for reasons explained above.
You are heading for a disaster if you are continually access funds from your superannuation “for various reasons none of them related to retirement”. You will never be able to replace the withdrawn funds plus the compound growth they will enjoy and will be left short of funds when they will be needed most – when your working income ceases.
spot on !
What if the advice provided is to salary sacrifice an amount above the fee charged and change the asset allocation which may result in a better return over time which increases the compound return while also providing financial advice for other areas outside super. The advice then puts the client in a better position potentially while also factoring in the fee.
Yup. Take money out of your super fund to upgrade your car or to spend at Harvey Norman, by all means, but heaven forbid you should use it to get advice on how to increase your wealth and become less reliant on the public purse!
Advice fees paid from super fund are for FINANCIAL ADVICE only, not buying a car or TV. A good financial adviser would advise you SAVE for the car and or TV. Read the article again..it was about paying for financial advice only.
The real issue is the Annual Fee renewal consent form red tape that has been imposed on consumers that doesn’t exist in any other nation on earth, except Australia. As a result of this highly inefficient legislation, low-fee-paying consumers have been let go. So much for reducing the costs of consumers.