Peter Hogg

A chorus of voices is growing louder over concerns surrounding the government’s drafting of new rules that would require super fund trustees to effectively vet every piece of advice delivered to fund members.

As revealed by Professional Planner last week, the language in a bill tabled in Parliament would require trustees to satisfy themselves that advice delivered to a member and paid for from the member’s account was wholly or partly in relation to the member’s interest in the fund, before the trustee could authorise the deduction of the advice fee.

Aware Super general manager of guidance and advice Peter Hogg told Professional Planner the current situation creates “uncertainty and frustration for both advisers and trustees, due to the lack of clarity around trustee obligations, resulting in individualised compliance approaches”.

“It’s crucial that industry has clarity around the expectations for trustees to undertake monitoring and assurance on advice provided to members, whether this is in legislation or guidance,” Hogg said.

“We would welcome endorsement of a risk-based approach to assurance that can be implemented at scale without sacrificing consumer protections for members.”

Hogg said Aware continues to “actively engage with government on making advice more accessible and affordable, with a clear focus on the role superannuation funds like Aware Super can have on solving the advice gap”.

The government is also likely to receive approaches from adviser and licensee groups in coming week, whose concerns are substantially the same as those of super funds but motivated slightly differently. It appears likely that industry representatives will seek to have amendments made to the legislation in the Senate.

It’s not possible for super funds, with the resources they currently have, to provide advice to every member who potentially needs or wants it, making referral or outsourcing arrangements with advice firms a critical part of the mix.

Licensees and advisers are concerned that if super funds are dissuaded from delivering advice to members by onerous, complex and costly administration and compliance, a potentially lucrative source of fees (or fee subsidisation) might be cut off.

Trustees have ultimate responsibility under the Superannuation Industry Supervision (SIS) Act to ensure the advice the member receives, and which is paid for from the member’s account, is wholly or partly related to the member’s interest in their super fund.

Trustees have considerable discretion in this matter, which raises the potential issue of a member seeking and receiving advice that does relate to their super fund, but trustees nevertheless denying payment to the adviser.

This in turn has raised concerns about trustees placing restrictions on who fees can be paid to, demanding to see the advice provided by the adviser before authorising payment (with the attendant privacy issues), or simply disputing what proportion of the fee charged relates to the member’s interest in the fund.

Sarah Abood

These concerns were touched on by the peak advice body, the Financial Advice Association, last week when its chief executive Sarah Abood said in a statement that there are concerns “with respect to the requirements for super fund trustees processing financial advice fees”.

“There is no clarity as to how these obligations will be met by trustees,” Abood said.

Abood said the situation could lead to “significant extra work for financial advisers who may be asked to provide additional specific documentation, such as Statements of Advice and invoices”.

“This will also require onerous processing by trustees,” she said.

“There are also questions about how advisers will reconcile their duties around privacy and client data protection with the requests trustees may make. This area requires more work to ensure obligations can be met efficiently and effectively.”