ASIC fine with extra advice fee compliance doc

The corporate regulator has confirmed it is aware super funds are increasingly asking licensees to ‘attest’ that advice has been provided to members before the fund will release fee payment, but added that trustees have been warned not to rely on the attestation letters too heavily.

In a response to liberal MP Bert van Manen’s question during a Parliamentary Joint Committee enquiry into ASIC’s oversight that was taken on notice on July 15 the regulator said there are “good reasons” super funds would want to make sure advice services have been provided before releasing payments to licensees.

“It is important that superannuation trustees have appropriate oversight of fees and other charges being deducted from members’ superannuation accounts for payment to third parties such as financial advisers,” ASIC Commissioner Danielle Press stated in the response published yesterday.

Press harked back to a joint letter sent out by APRA and ASIC in April last year that let trustees know their oversight into advice fee deductions from member accounts should be “preventative, interrogative and remedial”.

She pointed out Hayne Royal Commission Recommendation 3.3, which says trustees must not only obtain the members’ consent before fees are deducted, but also implement “appropriate processes” to determine whether they should continue to be paid on an ongoing basis.

While the attestation letters – which would fall in the “interrogative” category – have become commonplace, Press cautioned trustees from relying too heavily on them.

“ASIC and APRA were not prescriptive about how a superannuation fund manager should go about this task,” Press continued. “Although we did point out that trustees need to take care to ensure that controls on advice fee deductions do not place undue reliance on assurances or attestations from financial advisers or other third parties…”

The reason for this concern, Press explained, was the potential for the licensees’ to be affected by their own “personal conflict of interest”.

Covering their bases

Senator van Manen made the point in his original questioning that it may be unreasonable to expect licensees to make a blanket assurance regarding service provision with so many client interactions to track.

“I fully accept that all people should be getting the advice they’re paying for, but if you have 100 advisers in your licence, with even 100 clients each, there is always a chance that something is going to slip through the cracks,” Van Manen said

The MP added that he was unaware of any legislative basis for the letters “other than the fund managers trying to cover their bases”.

Another brick in the wall

For licensees, the extra layer of compliance from superannuation trustees is hardly welcome.

The fact that it’s not a regulated compliance requirement means there is a lack of standardisation in the requests, says Encore Advisory consultant and former managing director of licensee Godfrey Pembroke, Tom Reddacliff. This means they are more onerous and costly to complete.

The attestation letters are “fair”, he says, but the communication protocols around them are “challenging”. Often the letters constitute unnecessary double-handling, he adds, noting that ASIC expressed a desire to reduce compliance for advisers.

“I guess the tough part for licensees and advisers is the sheer volume of things like this they need to do at the moment,” Reddacliff says.

A separate mid-tier licensee CEO said that asking for attestation on a “reasonable basis” is fine, but challenging given that systems and processes are still evolving.

“The challenge of course is that super trustees are now a significant pool of additional entities that licensees are being regulated by,” the CEO said.