Alan Kirkland presenting at the FAAA Roadshow in Sydney. Photo: Adam Hollingworth.

The corporate regulator is making clear that it doesn’t expect superannuation fund trustees to audit every piece of advice paid for from members’ accounts, amid industry criticisms over the wording of a Delivering Better Financial Outcomes bill.

The DBFO bill, based on the government’s response to the Quality of Advice Review legislation, repeals and replaces section 99FA of the Superannuation Industry Supervision Act with the intention of giving greater clarity over how advice fees can be charged from a member’s super account.

The legislation has received heavy criticism from the Joint Associations Working Group, along with licensee groups, who felt the wording of the law put too heavy a burden on super funds and meant some funds might consider it not worth the compliance risk of allowing members to pay for external; financial advice from their super fund accounts.

ASIC commissioner Alan Kirkland told the Financial Advice Association Roadshow in Sydney on Friday the regulator has been attempting to provide some early guidance around the obligation for super trustees.

“Under those proposed reforms, as under the current law, it’s not our view that super trustees are required to check every Statement of Advice and we’ll continue to do our best to make that clear,” Kirkland said.

While the bill has received criticism from licensee groups and associations, the negative impact has been disputed by consultants to super funds.

But key super fund associations like the Association of Superannuation Funds of Australia and Super Members Council (the merged entity of Industry Super Australia and the Australian Institute of Superannuation Trustees) have publicly been quiet on the issue, offering no opinion either way.

Vexed issue

The obligation for trustees to monitor advice is part of the the SIS Act, where funds are required to make sure all expenses incurred meet the sole purpose test.

During his regulatory update before Kirkland addressed the roadshow, FAAA general manager for policy Phil Anderson noted this has been taken to “another level” by s99FA of the act which requires the trustee not to charge the cost of providing financial product advice unless the advice is personalised advice and wholly or partly about the member’s interest in the fund.

Phil Anderson. Photo: Adam Hollingworth.

“What this gets to is often you are providing advice that goes above and beyond the members in the fund,” Anderson said.

“They’re saying the super trustee needs to know what advice you are providing and the extent to which that advice relates to your client’s interest in the fund, to make sure the fund is not paying for advice that is unrelated to their interest in the fund. How exactly do they do that?”

Anderson said this has led to the situation where funds are asking for copies of SOAs which becomes time consuming for advisers, who must redact clients’ personal information.

“It’s been quite an unworkable model and we do think there needs to be a better solution,” Anderson said.

“We’re strongly opposed to trustees looking at advice documents that contain personal information. This is a privacy issue. We believe that it’s also an administratively inefficient process.”

The association has proposed alternative methods, including retaining a “sample-based approach” which Anderson said trustees had been doing but doesn’t seem to be allowed by the legislation as it currently stands.

“Maybe we need to help them move away from focusing on SOAs to focusing on letters of engagement that don’t contain that personal information,” Anderson said.

“Another key point we make, and we make this strongly, is that for any client who has already met a condition of release and transferred the money to retirement phase, they are entitled to take that money out when they wish. If that’s the case, then why should trustees need to check that it meets the sole purpose test?”

Further guidance up in air

Kirkland, who will be part of a Q&A session at Licensee Summit next month, noted there is a lot of reform going on, particularly with the DBFO package which ASIC is involved in, but that ultimately it’s the democratic process running the show.

“We don’t make the government policy decisions or design legislation, that’s a job for the government led by Treasury or advised by Treasury, and parliament makes the ultimate decision on the law,” Kirkland said.

“But ASIC does assist Treasury through that process, and we also then provide regulatory guidance once legislative reform has passed.”

Kirkland said whether or not the regulator will offer further regulatory guidance after any DBFO related laws pass isn’t certain.

“The point of that regulatory guidance is to help people and the entities we regulate comply with the law,” Kirkland.

“That’s something we’ll make a decision on once those reforms have passed in full, and we’ll be consulting with stakeholders like the FAAA to understand where there might be a need for us to better elaborate how the law applies and where our areas of focus are likely to be.”