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Risk that super trustees will misuse their advice authority

Mike Taylor7 May 2024
Bias, prejudice, preference

Financial advisers and their licensees want to avoid being placed in a position where they have to justify their fees to the trustees of superannuation funds.

They also want to avoid a situation where superannuation fund trustees can play favourites with respect to advice.

The Joint Licensees Group representing Australia’s mid-tier financial planning licensees has warned that the Government’s proposed new legislation carries with it the danger of impacting the relationship between advisers, licensees and super funds.

“In the current form of the Bill, the law changes will strain the collegiate relationships between financial advisers, AFSLs, and superannuation funds – and super fund members,” the JLG said in a submission to the Senate Economics Legislation Committee.

“Super funds, if charged with an expanded monitoring role, might challenge, or question the fees paid by members to their advisers, potentially leading to conflicts and a sense of distrust between these parties and between funds and their members, especially when clients and advisers inevitably experience the difference in interpretation and/or justification across funds,” it said.

“Advisers and AFSLs will almost certainly find themselves having to provide detailed documentation relating to fees and the scope of their advice, across a plethora of non-industry standard forms, templates, checklists that get prescribed by the super funds, leading to more time-consuming and complex interactions with super funds,” the joint licensees warned.

“One can envisage higher balance members (those with complex financial planning needs in particular) being driven to SMSFs out of frustration.”

“The enhanced role of superannuation funds in monitoring and approving adviser fees creates a power dynamic where a limited number of funds might adopt an ‘anti-advice’ posture and potentially misuse their new supervisory mandate,” The JLG said,

“Without a clear industry standard and approach to implementation, this could manifest in selective enforcement or biased scrutiny against certain members or types of members; and/or against certain AFSLs or individual financial advisers, possibly stemming from internal policies or market competition.”

“The risk of misuse of this new authority also ties into the broader implications of the new governance frameworks within superannuation funds. These frameworks, while designed to ensure better management and oversight, could be misused under the guise of regulatory compliance to favour, or disadvantage certain types of members, or certain advisers or licensees, impacting the competitive balance in the industry,” the submission said.

“This also presents a significant commercial moral hazard for the many funds that have their own advice businesses whereby commercial advantage could be gained through an imbalance in ease of process.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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23 days ago

Every time Canberra says they will reduce Red Tape, it ends up as More Red Tape.
Pollies & Bureaucrats of Canberra must be brought to change.
As we all know they cannot be trusted.

Tired Adviser
23 days ago

Why is it, that clients want the service and the advice,
Advisers are providing the service and the advice to better the client’s situation,
and Superfund will Sit back and say “NO sorry”.
Clients want advice and are struggling to survive as it is,
So Why not lump another out-of-pocket cost?
And the government is saying more people need advice.

Who is really behind this policy???

23 days ago

How can a staff member at a fund manager, removed from the client other than as a name on an application form, possibly provide any oversight or insight of suitability of the product or fees for service? Unless that fund manager staff member is also a qualified and experienced financial adviser and has access to all of the SoA’s, RoA’s, Service Agreements, Financial Services Guide for the Adviser, firm and Licensee, individual adviser training and qualification records, meeting notes, records of phone calls, calculations, relevant AFSL approved product lists, relevant research on the products recommended and NOT recommended….in other words they would have to have the exact same quality and quantity, breadth and depth of information about the client that the Adviser has.
Now, I am NOT going to be asking my clients to provide permission for blanket access to all of that personal information to persons unknown, for purposes unknowable, to be passed around from staff member to staff member, insto to insto etc.

Big Barry
23 days ago

Uni Super already does right now, they allow internal advisers to charge clients super funds for advice but doesn’t allow external advisers to do the same. this is anti-competitive behavior. also means Uni super can charge what they want because there is no competition to drive down costs.

22 days ago
Reply to  Big Barry

Australian Super is largely the same, although they do allow a cosy clique of third party dealer groups that actively promote Australian Super to charge advice fees to client accounts. But they block most smaller independent advisers, and those dealer groups that won’t commit to promoting them.

I only know of two union funds that are willing to work with small independent advisers to serve the best interests of joint clients. ART and Aware.

Would be interested to hear of any others?

Last edited 22 days ago by Anon
22 days ago

Another example of highly concerning outcomes which come from ill-defined or open to interpretation legislation.

I would like to think that the mixture of client consent and adviser testimony is sufficient in meeting consumer protection requirements.

But no… the underpinning to this is that financial advisers are told they are professionals when it comes to punishment, but then treated as if they aren’t professionals when it comes to fee extraction from super.

It’s an absolute farce.

22 days ago
Reply to  Frank

You’ve nailed the crux of the issue and the biggest slap in the face in all of this. Despite all efforts to professionalize the industry there has been a constant and significant increase in monitoring and compliance burden. If all of these regulations helped then why bother with becoming a profession. If a true professional is expected to act in their client’s best interest at all times then why do we need still more and more paperwork…