APRA: We won’t be consulting advisers on choice super test
The financial advice sector has not been consulted by the Australian Prudential Regulation Authority over extending the superannuation fund performance test to “choice” products and the regulator has no intention of doing so without an instruction from the Government.
While it has been widely acknowledged that extending the superannuation performance test to “choice products” will be complex because many members will have received financial advice to join a fund, APRA says it has not engaged with the financial advice profession.
APRA’s attitude is important because it is planning to run the first choice performance test this month.
APRA’s attitude has been expressed in answer to questions from Queensland Liberal Senator, Susan McDonald who pointed out that the choice performance test would “impact a range of products that are subject to personal financial advice by financial advisers”.
“APRA recently issued a statement that 20% of choice products failed the APRA heatmap test. Given that the YFYS performance testing regime results in a letter being sent to clients, where their fund or investment options has failed the test, how broad do you think the impact of this new phase of the YFYS performance testing will be? How many additional clients might be impacted?” McDonald asked.
“Has APRA engaged with the financial advice sector on the consequences of these changes?”
“The receipt of these letters from their super fund will cause a lot of concern for these clients, particularly where they have a financial adviser. Does APRA accept that there are many circumstances where these letters will go to clients and cause unnecessary anxiety? I am talking about situations where the underperformance related to a period prior to the client owning that option, where recent performance has been strong, or there are significant tax reasons making it inappropriate for a client to change their investment option at this point. What needs to be done to address the risk of this notice encouraging clients to make poor decisions?”
APRA responded that the number of products and options that will fail and the number of affected members will not be known until APRA run the performance test in August 2023.
“APRA has not engaged the financial advice sector. The design of the test is a matter for Government, including the extent to which the financial advice sector be engaged in the process.”
“The contents of the notification sent to members of products that fail the performance test is prescribed in regulation and is therefore a matter for Government.”
It’s great being a financial adviser in Australia isn’t it?
I’m at the end of my career. And hoped the worst was behind us. But it seems to me, there is now a new wave of worst, Jones, APRA and ASIC etc., their collective attitude to advice sector. Nothing has changed. With the collective might of Industry super and a labor Government (Not that the Libs were much better) I don’t see we have the lobby power to halt their treatment of the Advice sector.
None of my peers enjoy it anymore. And are at various stages of leaving. Some younger (late forties) have advised their business partners and the boards that they want out.
It’s getting worse, which is an impressive effort given how bad it has been in recent years.
They have never consulted real advisers for any other issue affecting them, why would they start now. I wonder why all their actions lead to further client detriment.
That’s an interesting point. Can anyone name an APRA success?
HIH
They’re about to destroy what remains of the financial advice industry? If that was their goal, then they’d regard that as a success?
Oh sure-the 2021 changes to income protection. Works as designed!
End of September, I’m out.
ASIC, APRA, Government have lost the plot. Clients don’t matter, only the jobs these numpties have matters. They have forgotten who they are employed to serve.
This concocted bureaucratic ‘performance’ test with its own set of assumptions and usual associated short comings that such things bring is broadly just another ‘view’ of an investments performance/suitability etc not completely dissimilar in some ways to investment ratings agencies, although nowhere near as robust as most research houses who actually have real expertise in forming opinions on investment products unlike the govt bureaucrats who have zero expertise and a way more narrow field of view when comparing super fund portfolios.
All such views are of course are nothing more than another’s ‘opinion’, in this case from the Govt body APRA (that alone should be a huge warning bell on its own!) and are more often than not wrong and or at the least coming at something from a particular funneled point on view based on various assumptions, biases and bents etc and without proper consideration of each portfolio and how that relates to an individual’s circumstances which of course they/govt bureaucrats know nothing about and do not consider when they throw out their ‘Sidchrome Spanner Toolkit’ type calculations/view.
As we know there can be a big diff between investments in even a broadly similar investment group like something as supposedly simple as say a ‘balanced’ portfolio such as risk adjusted return, asset allocation, liquidity, fund manager investment style, where we are in the economic cycle, ethics of the manager and so many other aspects that aren’t immediately obvious in a simplistic‘ performance/fees’ type return type test which this basically is. In this case, coming from a great big govt bureaucracy with no real expertise in investing and at best a very sketchy track record of regulating in its area of domain and who again knows little about investments and nothing about the client nor do they have expertise or are they licensed to give advice, and yet here they are proffering a form of recommendation they are not equipped or licensed to give.
Accordingly, advisers views with this should be to basically tell clients to throw this latest govt propaganda nanny state garbage in the bin where it belongs should they ever receive any such notices from them via their super fund! History shows us consistently, even on a mostly simple return/fees etc only measure like this, this years winners tend to be next year’s losers and every dog has it’s day so to speak, defying a key message to clients of sticking with their plan. And like changing lanes in city traffic, chopping and changing portfolios creates a lot of activity, stress, cost but rarely if ever sees you get to your destination any quicker than just staying in the one lane. As we know, there are times when changing portfolios can make sense but we know from experience it is rarely ever to do with past and projected future performance of a particular portfolio, which itself is often a relatively small part of a wider portfolio and rarely the a key item getting them to their goals ie. it makes sense to look at portfolio changes mostly when clients circumstances change etc.
I will guarantee you like all things govt, this nonsense will cause way more problems than it will ever solve (this is already happening in the Your Future Your Super products since they started being assessed) and poor old tax payers will simply be on the hook once again big time for yet another bunch of overpaid, irrelevant bureaucrats and massive govt over-reach for an overall negative result for clients, the industry and the country. All in a vain attempt at supposedly ‘keeping us safe’ once again (where have we heard that bs before!), cause they think none of us can be trusted to take care of ourselves of course in this over governed, over-stimulated/regulated nanny state, increasingly totalitarian world! The biggest lies, confusion, cock ups and corruption historically have nearly always come from govt’s and this is just another massive over-reach that will cause way more harm than good!
Thus as I said earlier, broadly our response to any clients who may come across this rubbish in their mail in the future will be to tell them to throw this latest piece of govt propaganda and misinformation in the bin!!! As they always say “I’m from the govt and I’m here to help”…….yeah right!!! :((((
Thanks for saying what we advisers are all mostly thinking…
I’m also assuming that in future we won’t need to warn clients that “Past earnings is not an indicator of future earnings” since APRA seem to have a CURE for that eventuality.
Spot on and thanks for adding that ‘past earnings disclaimer’ comment. I had meant to add that to my original comment but had a seniors moment and forgot. Past earnings would be somewhat helpful if only we weren’t investing forwards right! :))
There will continue to be “Heat Checks” until all Super Funds have been driven out or consolidated into 1-3 gigantic Super Funds subject to Government intervention, Union control, siphoning of funds, and usage for political “Public Benefit Policies” and favouritism. That is the nature of continued culling, until no one is left.
This is just like Banks, Cars, Energy, Timber, textiles, shoes, manufacturing, water, agriculture, the Indigenous Industry, and every other [progressively smaller] marginally important Industry that the ever expanding and ever more intrusive Bureaucratic Totalitarians and “Seen To Be Doing Something” Government can dig their greedy, grasping fingers into, “Fix”, “Improve”, “Protect the average citizen”, copy the rapacious EU’s grossly over intrusive policies, “Ensure that we are Good Global Citizens”, and/or facilitate their own political agenda.
“Government is not the solution; Government is the problem” [President Ronald Reagan]