With strong backing from licensees and digital advice groups, the Financial Services Council has called on the government to modify the Delivering Better Financial Outcomes bill in light of ASIC’s report which criticised lack of oversight from super funds over advice fee deductions.
ASIC Report 781, ‘Review of superannuation trustee practices: Protecting members from harmful advice charges’ found a sample of trustees were often not checking advice closely enough, or at all.
The DBFO bill sought to codify guidance from ASIC and APRA but has received criticism from the advice sector which argued the wording of the bill will add a layer of regulatory burden to funds and drive up the cost of advice.
FSC chief executive Blake Briggs called on Minister for Financial Services Stephen Jones to ensure his legislation achieves the goal of making financial advice more affordable and accessible by consulting in good faith on how to amend the bill.
“ASIC’s recent report highlights the legal risk and uncertainty for trustees when conducting assessments of advice fee deductions from superannuation accounts, and unfortunately [Jones’] advice reforms before parliament compounds the legal risks for superannuation funds,” Briggs said in a media statement.
The council had bolstered its ranks with the addition of WT Financial Group and Fortnum Private Wealth to its membership, along with the creation of the Digital Advice Expert Group.
The regulator has argued not all Statements of Advice need to be checked by funds, although it was unsatisfied with amount currently undertaken – only two of the 10 trustees in the review conducted over 50 sample checks during the 12-month window.
“ASIC’s assertion that funds are only expected to conduct risk-based assessments of statements of advice are incompatible with the heavy-handed language in its report, only serving to highlight the regulatory risks for funds and the need for clear legal obligations in legislation,” Briggs said.
“If the government’s intent is that funds are not required to check every statement of advice for compliance, this should be clear in legislation, and leading legal practitioners have made it clear to the government this is not the case in the current bill.”
The FSC submission to the Senate Economics Committee review of the omnibus bill recommended, amongst other things, the bill clarify the law does not require funds to check every piece of advice.
It’s been a rare case of unified action in the advice sector that even saw the return of the Joint Associations Working Group, which includes the FSC, speak out about the provision in the bill.
In addition to lacking oversight over fee deductions, the report criticised a lack of due diligence for reviewing fee caps and the frequency of crosschecking advisers against the ASIC Financial Adviser Register.
