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ASIC warns super funds on advice fees

Mike Taylor9 May 2024
Blind folded man walks off bridge

The Australian Securities and Investments Commission (ASIC) has fired a shot of over the bows of superannuation funds to increase their due diligence around the approval of financial advice fees.

Pointing to a newly-published ASIC report, ASIC highlighted that three superannuation fund trustees had reported not checking any advice documents on a risk or random basis and that fee caps as high as $20,000 or 5% of a members balance were in place, with few trustees implementing controls to protect members with low balances.

The ASIC release said that its review found that deficiencies in monitoring by superannuation funds had brought to light that the fees for no service issues raisd by the Royal Commission continued to prove a threat to members.

“ASIC recognises the importance of access to quality financial advice about superannuation, and acknowledges it is common for advice fees to be deducted from superannuation accounts,” the regulator said. “However, trustee vigilance can mitigate risks to members from unscrupulous operators, including cold calling businesses using high-pressure sales tactics leading to inappropriate superannuation switching advice.”

From a sample of 10 superannuation trustees representing approximately eight million members, managing a combined $923 billion in assets (as of 30 June 2023), we found over a 12-month period:

  • over $990 million in advice fees charged across more than 476,000 member accounts;
  • three trustees reported not checking any advice documents on a risk or random basis;
  • fee caps as high as $20,000 or 5% of a member’s balance were in place, with few trustees implementing controls to protect members with low balances;
  • members of 70% of trustees were found with advice fee deductions exceeding $15,000;
  • variability in onboarding and monitoring processes for financial advisers, including limited checks of ASIC’s registers by some.

“Super trustees are responsible for members’ money held within the fund. Effective trustee oversight practices can help mitigate risks and protect superannuation members from real financial harm over the long-term,” ASIC Commissioner Simone Constant said.

“Despite repeated calls for an uplift in practices from ASIC and APRA in joint letters issued in 2019 and 2021, our latest review shows continued deficiencies in trustee oversight of advice fee deductions by some trustees.”

Ms Constant continued, “ASIC is concerned about the potential impact on superannuation members, particularly amid evidence of balance erosion from fee deductions for advice originated by cold calling business models using questionable sales tactics that pressure members into switching superannuation funds.

“Superannuation trustees should have processes in place to detect and respond to suspicious activity.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Researcher
20 days ago

If only ASIC was as interested and vigilant about the decades long breaches of the sole purpose test by their union fund mates.

$7.8 Billion scammed 3 yrs
19 days ago
Reply to  Researcher

Oh our wonderfully misguided ASIC.
Besides the Regulatory Capture Corruption with best buddies Industry Super.
ASIC continue to KILL REAL ADVISERS at every turn.
Yet ASIC do almost nothing as another $2.7 BILLION is scammed off Aussies 2023. On top of the $3.1 Billion 2022 and $2 Billion 2021 and that’s only what’s reported.
Yep ASIC let Aussies be scammed by well over $7.8 BILLION in 3 years because ASIC don’t want people to be able to get Real Advice.
ASIC is beyond corrupt.
ASIC is beyond misguided.

Frank
19 days ago
Reply to  Researcher

Where’s the forensic look-in to the millions going out the door involving trustee spending of member funds?

Unreal.

ASIC for Dummies
20 days ago

Here we go again…. just when i thought that i could actually get some work done that would benefit clients.

Big Barry
20 days ago

Notice the change in tone from ASIC and Jones… guess who they are pushing to deliver more financial advice with fee for no service just their industry fund mates and back packers…. Most super funds have limits on the amounts that can be changed and account minimums why not just make that a rule instead of try to check SOA’s not sure what that is achieving

One foot out the door.
20 days ago
Reply to  Big Barry

Definitely a change in tone! I feel a stitch up coming.

Anon
20 days ago

So now ASIC is mandating super funds check advice documents ?!?!

Any adviser that provides a client’s SoA to a super fund is breaching the Privacy Act. This is effectively pushing advisers into a position of not getting paid.

This is yet another abuse of power by ASIC to implement their own biases, well outside both the letter and spirit of the law. There seems no end to the despicable lengths ASIC will go to in their indiscriminate persecution campaign against all licensed advisers.

headscratcher
19 days ago
Reply to  Anon

Clearly, it isnt.

Big Barry
20 days ago

Could it be just more people are getting advice now…. all the people that need advice and we don’t have enough advisers to service these people… If ASIC removed the red tape maybe we could service more people and double that number…

Uber Qualified Adviser
20 days ago
Reply to  Big Barry

Jones has already effectively said that the red tape is not going.
He didn’t use those exact words although that was what he inferred.
He said, sure I can consult, however I’m under no obligation to give you what you want.
An unmitigated disgrace.

Anonymous
20 days ago

990000000/476000=$2,079.83 per account, less if there were more than 476,000 accounts.
Why are ASIC shirking their responsibility by offloading it to superannuation trustees when we pay them to perform such matters. The mind boggles.

Edward
19 days ago
Reply to  Anonymous

Staggering to think that this is their area of focus and not the billions and billions of dollars lost to scams and unlicensed “advisers”. They’ve been chasing the 1% gains before starting on 99% of the problems.

Anon
20 days ago

Most union super funds already use blocking techniques to stop their members from paying for professional independent advice from their super fund.

Now ASIC is effectively forcing all APRA regulated funds to do the same, by making it a requirement that the adviser breach the Privacy Act in order for the fund to release payment. (And you can be sure ASIC will be straight onto any adviser that does so).

So the only option for consumers to pay for professional independent advice from their super fund is via an SMSF where the fund trustees and the advice recipients are the same people, so there is no privacy breach.

Over it
19 days ago

Disgraceful to think ASIC are at us again!

Nuffyland
19 days ago

The cold-calling comment is just a furphy. ASIC said quite plainly at the Royal Commission, they don’t think financial advice is necessary or worthwhile. They are determined to shut us all down. Most of the problems we have with the cost and accessibility of advice can be traced back to ASIC’s meddling. They have learned nothing from the scores of surveys (even their own) which shows that demand is high and satisfaction among our clients is on par with the most trusted professions. They think they know better, such is their arrogance. Our politicians need to wake up and stop listening to these toxic bureaucrats. Enough is enough.

Curious onlooker
19 days ago

This is 100% in response to that peanut from AIOFP going out of his way to call out ASIC and demanding an apology in the media.

Sometimes he needs to take a deep breath and consider the consequences of his actions.

Its like the year 7 kid calling the year 12 bully to the school yard after school for a fight. Only going to end one way

Anon
19 days ago

Thanks for your input Neville Chamberlain.

Misguided ASIC
19 days ago

So ASIC should not be called out for their ongoing misguided blame Advisers for everything.
Like when the Big 4 Bank Managers, RM’s and CEO’s knowing stole $6 Billion from customers in the FFNS scandal and not 1 single Bank Managers was ever held accountable.
And ASIC blame the Bank Managers theft on Advisers and clearly continue to try to blame Advisers.
Non one should call this out ?
Are you a Bank Manager or an ex Bank Manager that now works at ASIC ?

Not a coward
19 days ago

There is no point hiding in the corner hoping they will stop before they get to you. The unions and industry super funds call what they are doing “the super wars”. They mean it. They believe they are justified in taking any action to eliminate financial advisers. How much more evidence do you need before you realise they will not stop until the only advisers available are the new “Qualified Financial Advisers” with no qualifications who work for industry super funds. If you are going to go down it’s better to go down fighting than crying in the corner.

ENOUGH IS ENOUGH
19 days ago

If the regulator gets embarrassed when their employees, who ironically were the responsible legal officer for the FFNS debarcle at Westpac leading into the Royal Commission into Banking (where all penalties have been funded by advice mostly unrelated entirely to Banks) are directly quoted, then country has even bigger problems than the obvious. The obvious being the corruption at the regulator and ALP to profit industry funds at the cost of killing the non-aligned advice profession (figuratively and literally) who put clients before their super fund.

ENOUGH IS ENOUGH
19 days ago

BOTH ASIC AND THE SUPER CONSUMER GROUPS FUNDED BY LABOR ARE ENTIRELY INCONSISTENT. If you read the study 90% of Advice was found to be appropriate and this is the response.

Consider in 2019 BASED ON ASIC’s RESEARCH LESS THAN HALF of 233 superannuation employed advice files reviewed by ASIC demonstrated full compliance with best interest duty and related obligations, according to a report released by the regulator REP639.
While only 49 per cent of files demonstrated full compliance, 15 per cent of files not only failed to meet best interest duty but indicated the member was at risk of SUFFERING DETRIMENT following the ADVICE PROVIDED BY THE FUND.

ASIC Report 639, Financial advice by superannuation funds, PROVED FUNDS PROVIDED ADVICE WHICH DOES NOT MEET BEST INTEREST AND HARMS MATERIALLY MORE MEMBERS THAN ASICS RESEARCH ON EXTERNAL ADVISERS WHO CHARGED A FEE TO ADVISE SUPER MEMBERS. WHY DONT OUR PROFESSIONAL BODIES GO TO THE BROAD MEDIA ENOUGH IS ENOUGH – Posturing Lying funding consumer groups to spruik policy to benefit industry funds, in antithesis to the YEARS of consultation to make rookie wholesale errors in the legislation, now using ASIC to push their agenda on flawed and inconsistent research. Labor must GO! Its in Australias best interest, they are disgusting liars backdooring anything to benefit industry funds and the regulator is even worse, OVERREACHING AND CLEARLY CORRUPT.

Last edited 19 days ago by ENOUGH IS ENOUGH
ENOUGH IS ENOUGH
19 days ago

THE AIOFP have a partnership with FBAA, maybe to make any impact at all the FAAA should partner with CFMEU?

Astonished
18 days ago

well I charged a mere advice fee of $1,100 inc GST to Q Super for an annual review, on Super worth $300,000 approx, this involved an advice document, research from Lonsec, performance and retirement tracking, salary sacrifice, non-super cash flows to meet new property loan obligations, taxation of income, insurance review inside and out, hours of time and sitting in traffic then Q Super very reluctantly paid this. The straw was that I was going to say to the clients I couldn’t service them anymore. Q Super / ART are a downright bully, where is the respect for quality advice! ASIC only focusses on the bad, bad stuff and considers this is normal ? Q Super and Mr Jones really lack maturity, leadership, diversification of competition, members interests and sensitivity. None of them have run a small business. $1,100 inc GST as a fee just does not cut it with increased regulatory and AFSL costs ! Thought this approach would have been easy. And I have never done anything wrong or had a single complaint, yet I am treated still to this day like a F criminal. I ask you if any red tapers are reading this to think about my strong ethics within the community and my family.

Outside the box
16 days ago
Reply to  Astonished

We deal with ART/QS as well. A long time ago, we decided to forget about super fund payments and just charge people via direct debit. Has worked well for us for twenty years.

XTA
18 days ago

Must be heaps of AFCA complaints regarding this then. Is there a rule which dictates what a business can charge as a fee, especially when the consumer signs and accepts said fee?

Also, did I read ASIC picked certain super funds with unusual volume of advice fees and other parameters, which means it’s not a true representative sample (statistically) of the advice industry? There was also no mention whether this related to inhouse superannuation advice teams.

Lastly, the timing of the release of the report from ASIC is purely coincidence isn’t it!

This is a stitch-up, and already the media have taken it and run to publish (exaggerated) negative articles.

bemused
18 days ago

ASIC states “Our role under the ASIC Act is to:

  • maintain, facilitate, and improve the performance of the financial system and entities in it
  • promote confident and informed participation by investors and consumers in the financial system
  • administer the law effectively and with minimal procedural requirements”

ASIC is corrupt, has failed in its mandate, lost the support of the Financial Services Community, and are clearly out to destroy Advisers before their corruption & failure is caught out.

Billions lost to scammers and ASIC are intent on the destruction of Financial Advice, not delivered by Union super funds.