ASIC's Danielle Press (left) and APRA's Helen Rowell

ASIC and APRA have urged trustees to not solely rely on the signed fee consent forms advisers need to provide from July 1, but to keep an eye on statements of advice and related documents as part of their “trustee oversight practices” to make sure fee deductions are appropriate.

Just hours before legislation came into effect requiring trustees to receive a copy of clients’ informed consent to deduct advice fees from super accounts, regulators sent a joint letter telling trustees that “over-reliance on member consent” should be avoided.

“Instead reliance on the consent should be combined with further trustee oversight practices, in particular, proactive reviews of a sample of Statements of Advice (SOAs) and/or related documents to evidence the provision of services, either where misconduct is suspected or as part of a regular review,” the letter stated.

“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 joint letter is signed by APRA deputy chair Helen Rowell and ASIC commissioner Danielle Press.

In a move that will do little to engender trust, the regulators’ exhortation came with a warning not to take advisers at their word.

“Reliance on attestations by financial advisers or advice licensees that services have been provided has limitations due to the potential for conflicts of interest, so cannot in all circumstances be relied upon.”

The regulators justified the directive by saying it observed a wide spread of practices used by trustees in determining whether members had provided consent for fees to be deducted, as part of a 2019 review into trustee oversight processes.

“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 letter stated.

Privacy concerns

According to trustee experts, industry super funds like Aussie Super, Sunsuper and Hostplus have increasingly asked advisers for copies of advice documents since the Hayne royal commission.

The practice has the potential to spark concerns about privacy and disclosure.

If funds haven’t included a consent for advisers to provide the clients’ SoA in the original fund application form it would need to be sourced. Even with permission, the question remains for advisers: how much information is prudent to provide?

“It depends on what has been agreed between the client and the adviser,” says Jonathan Steffanoni, partner at consultancy firm QMV.

The concern is more around the release of confidential information than personal information, Steffanoni explains.

“What’s governed by the Privacy Act is personal information like the client’s name, date of birth, things like that, which is distinct from confidential information,” he says. “It’s important for the adviser to understand any confidentiality arrangements that are in place with their clients and ensure they adhere to those.”

According to the The Fold Legal partner Simon Carrodus, the practice of requesting SoAs goes back to the sole purpose test. After the royal commission, super funds wanted to make sure that the fees coming out of super were related to advice on super.

Yet trustees should generally have no real need to review the whole SOA, he says.

“What trustees need to check is the adviser’s name, the client’s name and the scope of the advice,” Carrodus continues. “That information will usually be contained in the first two or three pages. The rest of the SOA can be removed or redacted. Trustees don’t need to see the whole SOA.”

 

7 comments on “Check SoAs as well as consent forms, regulators tell trustees”
  1. Avatar
    Chris Cornish

    Interesting that ASIC and APRA don’t think there is a privacy issue in disclosing confidential adviser/client documents.
    Also interesting the federal Liberal government doesn’t realise that when a government dictates the distribution and exchange of products/services , it is literally the definition of socialism.
    The Liberal government is telling super funds to check what services are being provided and that the fees are reasonable. And ASIC (the government) are the ones advising the super funds what appropriate fees are, and what services are required. Full on socialism by this government. The people themselves are considered far too thick to be able to determine whether or not they should sign a fee form on their own. Far too dumb to determine whether they are happy with whatever service is being offered. Instead, we must all abide by government’s standardised service levels and standardised fee structure.

  2. Avatar
    Darren Morris

    So we will now be handing over SoAs to go with the fee consent form. Maybe, a copy of my file notes and working papers should be provided as well, so the trustees are truly satisfied that not one dollar of fee will be deducted out of the members account for non-super advice. And definitely itemised time-sheets, just to be sure that I don’t accidently charge the super member’s account for the time dedicated to estate planning, debt, cashflow or non-super insurance. Then wrap around that a statutory declaration and character reference from 2 imminent local people (not other financial advisers) to give the trustee comfort that they aren’t dealing with one of those cunning financial advisers desperate to get around the sole purpose test. That might just work.

  3. Avatar

    The immediate issues of additional oversight, delays and inconvenience may pale into insignificance in October when additional regulatory reforms – breaches, complaints and distribution obligations – kick in. While Trustees should be prudent, requesting an SOA as a precondition to acting on members’ clear consent seems imprudent. Quite apart from questions about their capability and competence to assess advice, it may expose Trustees to additional liability. For example, if a Trustee received the written advice and approved the payment of advice fees, isn’t that an implicit (if not explicit) endorsement of the appropriateness of the advice? Trustees might find themselves joined in actions seeking compensation for inappropriate advice and breaches of their duties to their members. The Licensee is the party that is, and should be, accountable for the advice and the legitimacy of any consent order submitted to a Trustee.

  4. Avatar

    APRA Funds require the client to sign a declaration about the fees to be deducted. If this can’t be relied on then why does any of the attestations the client makes have validity?
    It is not appropriate for RSE’s to become gatekeepers for ASIC in their supervisory role of financial advisers. If the deduction of fees from super is not for super purposes, it should be detected by the AFSLs internal file reviews.
    AFSLs are the gatekeepers for Adviser conduct and with FASEA, Advisers must also take responsibility for their behaviour. ASIC is the regulator not APRA.
    It seems that clients are not credited with any capacity to understand what is said or asked of them, advisers deliberately attempt to exploit this, and AFSLs are incompetent.
    Enough is enough.
    The ‘sole purpose test’ furore which saw ASIC and APRA issuing ‘joint statements’ on the subject has set a precedent. But to me it just highlights the demarcation of responsibility and that teaming up is the only way to ‘solve’ some regulatory issues. This latest move is yet another example.
    The SPT issue came to prominence as Industry Funds tried to roll out financial advice to members via a ‘one in all in’ fee take which should never have been considered appropriate.
    So now we have the joint regulator with a precedent to continue to ‘shirt front’ the industry.

  5. Avatar

    This is getting ridiculous and the spirally costs from all parties is going to push advice costs higher and higher.
    An SOA contains all a clients financial information which the Trustee of a super fund has no right to. The only information relevant to them is the information relatng to their product and trying to carve this out will be another cost at the practice level.
    ASIC has provided guidance on what needs to be in a fee consent form and it does not include services. The Fee consent form can only be given with an FDS and that is the reference document – you don’t need to reincorporate it.
    The client is provided with a fee estimate in their first or second meeting via a letter of engagement. They then receive an SOA with a full explanation of not just the advice fees but a whole range of fees charged by other suppliers that have nothing to do with advice, including administration fees, fund manager MERS, ICRs and buy sell spreads and then comparisons of what other products costs as well as analysis of other benefits. Each year they receive an FDS which fully outlines all the fees and services provided and a forecast of the next twelve months and now each year they hvae to opt in to those services. Each meeting they have with an adviser must be evidenced by an advice document and in most cases this will also explain any fees and services provided.
    The product provider also provides a full transaction statement to the member with any fees deducted for advice services fully disclosed (unless you are in an industry fund that just charges all members below the line) and summarised.
    You can’t legislate against stupidity. The consumer must take some responsibility somewhere in here, given the amount of both written and verbal disclosure that is provided on fees and services, to make an informed decision.
    Layer and more layers of disclosure takes more and more time, adds cost and adds no value.
    ASIC needs to hold licensees and advisers accountable and they do. We do not need trustees of product providers reviewing advice – they are not competent to do it and they should be focusing solely on managing the administration and investments entrusted to them by the members and advisers.
    APRA may not trust advisers but our clients do and they are being serviced by appropriately educated advisers with a very robust professional standards regime.
    Jane Hume has said the government is about reducing complexity and the cost of advice, well here is an opportunity for common sense to trump overzealous regulators

  6. Avatar
    Steve Blizard

    To quote another adviser ” why not makes all of us ASICs employees: Department of Advice. Then create another three mega-departments: superannuation, insurance, investments, where all super, insurance and investments will be managed. Then we won’t need AFCA, APRA, TPB, AFA, FPA, etc. Everything will be managed by only ONE government agency. No need for Royal Commissions because government cannot investigate itself. Everybody will be employees of this agency. There won’t be any compliance issues, no ethical issues, etc. Everything will be done by the book. If anyone does anything wrong – firing squad without trial. Happy Days!”

  7. Avatar
    Tom Reddacliff

    Tahn, there is clearly fundamental mistrust at all levels behind what is occurring. What everyone keeps ignoring is the client/member. The amount of time the business needs to spend redacting these documents for the different super funds as well as dealing with separate consent forms further adds to inefficiency and cost the client ultimately pays for. I would argue the separate requirements and processes are anti member. Enter the FSC, who have just put on the record via a Green paper how much they want to impact the cost of advice. Here is opportunity for action

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