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The link between affordable advice and the super sole purpose test

Mike Taylor28 February 2022
Advice fees

The Treasury Quality of Advice Review is already scoped to look at intrafund advice, but an answer provided by APRA to Senate Estimates makes clear that some superannuation funds may already be exceeding their rights under the sole purpose test with respect to the provision of advice.

According to APRA’s interpretation, unless superannuation fund members are directly paying for advice out of their own pockets, the provision of advice around salary sacrificing, and the investment of inheritances would breach the sole purpose test as it currently stands.

What is more, APRA has made clear that superannuation are breaching the sole purpose test when they provide intrafund advice to a member’s spouse.

APRA had been posed with a series of questions by West Australian Liberal Senator, Slade Brockman who had been adviser to former Finance Minister, Mathias Cormann.

Brockman asked:

Is advice on reducing expenditure to enable a member to salary sacrifice into super compliant with the Sole Purpose test?

Where someone is due to receive an inheritance, and they want advice on what to do with their inheritance and the advice is to put some of the money into superannuation, then does this comply with the Sole Purpose Test?

Given the above examples, provided to me by financial advisers, do you accept that current guidance on sole purpose is insufficient?

Would the extension of intra fund advice to allow for the provision of advice to the spouse of a member breach the Sole Purpose Test? Has APRA looked at this issue?

The key, according to APRA, is whether superannuation fund members are personally paying for the advice with monies held outside of superannuation, rather than it being deducted from their superannuation account balance.

It said that if the advice was paid for by the superannuation fund trustee with the consent of the member, then it would likely be inconsistent with the sole purpose test.

APRA has said it is reviewing the sole purpose test in the context of the member best financial interests duty contained in the Your Future Your Super legislation, however the matter is also expected to be traversed as part of the Quality of Advice Review in circumstances where superannuation funds have urged an expansion of intra-fund advice.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Colin Oskpoy
2 years ago

Does anyone / APRA / Treasury / Industry Super have a total figure $$$$$$$ Millions that is taken from members accounts each year via these Hidden Commissions to pay for Intra Fund Advice / Sales ?
Does anyone / APRA / Treasury / Industry Super have a figure on how many members use Intra Fund Sales ? And thus how many members DON’T use Intra Fund Sales Advice. Thus how many ISA members are paying Hidden Commissions for NO SERVICE. And what’s this total cost of the theft that is ocuring.
Intra Fund Advice is a relict that needs to die.
If members want Advice they have to pay for it. Be it from Super or personally but it is totally unacceptable that the majority of members are paying Hidden Commissions for NO Service.