FAAA warns on cost of collectively charged advice

Mike Taylor

Managing Editor and Publisher

23 September 2025

The Financial Advice Association of Australia (FAAA) has warned Treasury that the cost of collectively charged retirement advice is likely to be significant greater than the cost of collectively charged intra-fund advice in the accumulation phase.

Reinforcing its opposition to the Government giving superannuation trustees the ability to collectively charge for comprehensive retirement advice, the FAAA reinforced that members of funds will be paying much higher amounts for advice they are not actually receiving.

It said this included members who have sought and paid for their own personal financial advice with their chosen adviser “but t must still pay for the collectively charged advice provided to other members of the fund on top of that”.

The FAAA has used its submission to Treasury on Best practice principles for superannuation retirement income solutions to state that “Comprehensive retirement advice should only be offered by licensed professional financial advisers who have the education, experience and ethical obligations that enable them to provide this advice in an appropriate manner”.

The FAAA signalled that it was particularly concerned about the so-called ‘nudges’ regime being proposed for superannuation funds in prompting members, noting that it had previously raised the issue with respect to the Delivering Better Financial Outcomes (DBFO) legislation.

“We expressed concerns about how these nudges could involve recommendations based upon inferences drawn by the trustee about a cohort that the member may belong to purely due to the limited personal information a client has provided to the fund,” the FAAA said.

“We are concerned about potential consumer protection issues this may create for members, particularly if ‘nudges’ are utilised for the purposes of providing retirement advice, that is also personal advice, where the decision is so important to the person’s future and often cannot easily be reversed. We are seeking clarification on what consumer protections will exist.”

“We have taken ‘nudges’ and ‘prompts’ to mean the same things and will treat them as one in this submission. It is our view that the ‘nudge’ should always be based upon the member’s personal circumstances and not be a blunt product sales exercise.

“The focus of the ‘nudge’ should be the member’s personal circumstance, more than it is with respect to any financial product. ‘Nudges’ for a particular reason should be a once off and not utilised as a ‘series of nudges’ that is designed to encourage a member to take any particular action. ‘Nudges’ should also not be used as a substitute for genuine personal financial advice,” the FAAA said.

The FAAA makes the following recommendations in regard to all the best practice principles:

• ‘Nudges’ or ‘prompts’ be clearly defined with specific consumer protections around their use. It should be made clear when a message sent from trustees to members is done as a ‘nudge’; and should include clear warnings as to the intent of the engagement – that it is not genuine financial advice, and that the member should seek financial advice.
• The policy settings must make it clear as to the boundary between ‘information and guidance’ provided to a member by a trustee, ‘nudges’ trustees give members, and the provision of financial advice, including general advice and personal advice.
• The final Principles must use accurate terminology, consistently applied.
• Any ‘information and guidance’ provided to a member by a trustee must include:

o A clear warning that it is information only and not financial advice.

o A clear recommendation to the member that they seek personal financial advice to assist them in making a decision about the retirement income options that are appropriate for their circumstances. This should include a clear explanation about the difference between intrafund advice on their interest in the fund, more comprehensive advice that considers their broader personal circumstances provided by a registered relevant provider (financial adviser) and factual information. In the context of the proposed introduction of a ‘new class of adviser’ (NCA) under the DBFO reforms, this distinction should also be disclosed. This disclosure should include a statement on the minimum professional standards that apply to a relevant provider versus an NCA. The provision of this information is in line with the purpose of the Framework to ‘increase transparency’ across the retirement system.