Australian super funds incurred almost $1.9 billion of financial advice expenses in FY23, according to data released by APRA on Wednesday morning.
The figures reported in APRA’s June 2023 annual fund-level statistical analysis publication illustrate the expenses already associated with delivering financial advice to fund members, even before funds are pushed to the frontline of advice delivery by their obligations under the Retirement Income Covenant and the government’s response to the Quality of Advice Review.
The APRA analysis found 65 funds with balance dates of 30 June incurred $1.86 billion of advice expenses, including $81.4 million of expenses relating to intrafund advice, according to information provided by the funds under Superannuation Reporting Standard (SRS) 330.0, and provided to APRA in Superannuation Reporting Form (SRF) 330.0.
SRS 330.0 requires funds to report “expenses that relate to the provision of financial product advice to a member”. This includes expenses for which “activity fees relating to provision of financial product are charged”.
An activity fee is charged to a member that relates to an activity of an RSE (register of superannuation institutions) licensee that is “engaged in at the request, or with the consent, [of] a member or that relates to a member and is required by law”.
Advice expenses are distinct from a fund’s administration expenses, which are expenses that relate to the administration or operation of the fund.
The APRA analysis shows that 41 of the 65 funds that reported advice expenses are retail funds, and 17 are industry funds, with seven corporate and public sector funds. A further 35 funds reported no advice expenses, including four whose data has been masked by the regulator to maintain privacy. These included the Linfox Staff Superannuation Fund, the Macquarie University Professorial Superannuation Scheme, the Towers Watson Superannuation Fund, and the University of Wollongong Professorial Superannuation Scheme.
Advice expenses in super funds are driven by a range of factors, including how actively they engage with financial advisers, which is particularly relevant for retail funds that rely heavily on advisers to attract members and whose advice is frequently charged against their clients’ super account balances.
This is reflected in the fact that the advice expenses incurred by 10 retail funds were also the highest advice expenses incurred by super funds overall, led by Wealth Personal Superannuation and Pension Fund (AMP’s North superannuation fund), Macquarie Superannuation Plan, HUB24 Super Fund, and ASGARD Independence Plan Division Two.
| Top 10 retail fund advice expenses | Advice fees | Net assets | ||
| Fund | $ ‘000 | $’000* | ||
| 1 | Wealth Personal Superannuation and Pension Fund (North) | 294,463 | 50,424,553 | |
| 2 | Macquarie Superannuation Plan | 221,474 | 31,775,096 | |
| 3 | HUB24 Super Fund | 172,764 | 17,144,691 | |
| 4 | ASGARD Independence Plan Division Two | 148,971 | 16,798,369 | |
| 5 | Netwealth Superannuation Master Fund | 145,485 | 19,035,741 | |
| 6 | MLC Superannuation Fund | 131,443 | 23,368,943 | |
| 7 | IOOF Portfolio Service Superannuation Fund | 118,645 | 31,548,335 | |
| 8 | Colonial First State FirstChoice Superannuation Trust | 109,062 | 82,906,802 | |
| 9 | Avanteos Superannuation Trust | 67,670 | 10,982,447 | |
| 10 | MLC Super Fund | 62,411 | 77,398,764 | |
| *Net assets at beginning of period | ||||
| Source: APRA Annual Fund-level Superannuation Statistics, June 2023 (Issued 13 December 2023) | ||||
Industry fund Australian Retirement Trust, came in 11th on advice expenses overall, and was the industry fund with the highest reported expenses, ahead of HESTA and Hostplus. Aware Super, classified by APRA as a public sector fund, reported lower advice expenses than ART but more than HESTA.
| Top 10 industry fund advice expenses | Advice fees | Net assets | ||
| Fund | $ ‘000 | $’000* | ||
| 1 | Australian Retirement Trust | 57,899 | 231,685,036 | |
| 2 | HESTA | 15,794 | 65,201,835 | |
| 3 | Hostplus | 5,776 | 80,004,068 | |
| 4 | Cbus | 4,738 | 69,908,832 | |
| 5 | Equipsuper | 2,748 | 29,586,438 | |
| 6 | NGS Super | 2,158 | 13,064,455 | |
| 7 | Prime Super | 1,084 | 5,963,636 | |
| 8 | TWU Superannuation Fund | 767 | 6,085,976 | |
| 9 | First Super | 747 | 3,593,589 | |
| 10 | Spirit Super | 555 | 25,106,156 | |
| *Net assets at beginning of period | ||||
| Other fund (public sector, corporate) advice expenses | Advice fees | Net assets | ||
| Fund | $ ‘000 | $’000* | ||
| 1 | Aware Super | 44,224 | 145,773,385 | |
| 2 | Telstra Superannuation Scheme | 10,426 | 23,323,102 | |
| 3 | LGIAsuper | 6,003 | 22,340,595 | |
| 4 | Local Government Super | 395 | 13,172,330 | |
| 5 | Local Authorities Superannuation Fund | 102 | 11,698,746 | |
| 6 | Commonwealth Bank Group Super | 72 | 11,877,785 | |
| 7 | AvSuper Fund | 1 | 2,326,503 | |
| *Net assets at beginning of period | ||||
Earlier this month Minister for Financial Services Stephen Jones unveiled the government’s latest round of responses to the QAR, including changes to general advice laws and allowing super funds to “nudge” members when advice may be appropriate without triggering the requirement to provide comprehensive advice.
The government has also clarified that under the sole purpose test funds will be allowed to charge members from their account balances for retirement income advice, and has indicated the range of allowed advice topics will include investment options within a fund, contribution strategies and retirement income options (including product recommendations), and that the advice may consider a member’s broader financial position, including their partner’s situation – a significant step up from what’s allowed under the current intrafund advice rules.
To facilitate the delivery of more advice and guidance to fund members, the government has proposed a new category of adviser, controversially named “qualified adviser”, who will be subject to a lower standard of education and qualification than professional financial adviser. This is part of the government’s overall push to dramatically expand the availability of financial advice as an ageing population rushes towards retirement.
