In light of the guidance offered from the corporate and prudential regulators, CFS has put a threshold on the advice fees an adviser can take out of superannuation and pension accounts.
The provider completed a regular review of advice fee thresholds, and took guidance from ASIC and APRA that was given to all RSE trustees last year about oversight measures expected to be in place when permitting advice fees to be charged to member accounts.
The ongoing fee cap for CFS FirstWrap super and pension account holders is 2.5 per cent on account balances over $10,000, while one-off advice fees are capped at $1,750 plus 2.5 per cent of account balances (capped at $12,000 per annum).
For FirstChoice the cap for ongoing advice is the lower of either 2 per cent of the account balance or $1,000 (if it is over the $10,000 threshold). One-off advice is capped at $1,500 plus 2 per cent, capped at $8,000 per annum.
The move correlates to ASIC’s RG 97, which outlines fee disclosures in PDSs and periodic statements, as well the legislative instrument granted to ASIC with the passing of Hayne Royal Commission legislation last March that dictated consent required for deduction of advice fees.
The move shouldn’t be prohibitive for advisers given that 2.5 per cent is well over the going rate for ongoing advice, but it does have the potential to restrict fee payment options in circumstances where fees aren’t apportioned evenly between clients with multiple funds, or between super and non-super advice services.
In a statement to Professional Planner, CFS said it assessed the fees being paid by members to advisers across its platforms, the average cost of advice, and engaged with advisers and licensees to ensure these new thresholds were appropriate.
CFS also noted that it is open to working with advisers on charging higher fees on occasion.
“While the thresholds are designed to align the general member paying advice fees from super and trustee obligations, we recognise there may be situations where it is appropriate for the trustee to consider an exception to the thresholds and we will work with advisers in these circumstances to achieve the right outcome,” a CFS spokesperson said.
“We understand that other trustees have introduced similar measures as part of their trustee obligations.”
The changes will commence from 1 March, 2022.
FirstWrap Super and Pension Thresholds
| Ongoing and Fixed term advice fees | |
| Account balance | Upper threshold |
| Under $10,000 | $0 |
| $10,000 and above | 2.5% of the account balance |
| One-off advice fees | |
| Account balance | Upper thresholds |
| Under $10,000 | $0 |
| $10,000 and above | Maximum one-off fee transaction: $1,750 + 2.5% of current account balance, capped at $12,000 per annum. |
Source: CFS
If monthly fees were above the threshold or the account balance falls below $10,000 CFS could reduce the fee to the maximum allowable per the thresholds or turn off fees for accounts with below $10,000, depending if the client had not taken action within a certain timeframe.
FirstChoice Super and Pension Thresholds
| Ongoing and Fixed term advice fees | |
| Account balance | Upper threshold |
| Under $10,000 | $0 |
| $10,000 and above | The lesser of the following (per month):
|
| One-off advice fees | |
| Account balance | Upper threshold |
| Under $10,000 | $0 |
| $10,000 and above | Maximum one-off fee transaction:$1,500 + 2% of current account balance, capped at $8,000 per annum.
|
Former BT executive Kelly Power was appointed as CFS Superannuation CEO in July last year after previously serving as general manager for product at CFS since 2018.
