Super funds the ultimate winners from QAR

Mike Taylor

Managing Editor and Publisher

14 June 2023

ANALYSIS

The real surprise from the Government’s response to the Quality of Advice Review (QAR) would have been if it had not comprehensively backed increased financial advice delivery by superannuation funds.

In the days when the former Coalition Government was canvassing an “Affordable Advice Review” well before lawyer Michelle Levy was appointed to head up the QAR it was self-evident that superannuation funds were the obvious means of delivering low-cost advice with most already doing so via intra-fund advice.

Just as financial services product manufacturers once legally subsidised the delivery of financial advice via the payment of commissions to financial advisers and volume rebates to licensees, superannuation funds have a capacity to deliver “affordable” advice via recourse to a group funding pool.

And make no mistake, industry superannuation funds have been lobbying for this sort of outcome for more than a decade, canvassing both an extension of intra-fund advice and key revisions to the sole purpose test.

The QAR final recommendations picked up on those superannuation fund messages and the Government’s response has embraced the concept stating:

• The restrictions on collective charging will be amended to allow superannuation funds to provide more retirement advice and information to their members (accept in principle recommendation 6).

–          This will work with industry to consider adopting, and tailoring as needed, recommendations 1-4, the remaining parts of recommendation 5, and recommendations 12.1 and 12.2 to implement recommendation 6.

• . Superannuation trustees will be provided with legal clarity around current practices for the payment of adviser service fees (accept in principle recommendation 7).

The degree to which the Government has embraced the increased role for superannuation funds was revealed in the comments of the Assistant Treasurer and Minister for Financial Services, Stephen Jones, in announcing the Government’s QAR response that the existing rules “constrain the very rules conversations that need to happen”.

“This advice gap is leading to worse outcomes for members. Superannuation funds have told me that they have many retirees who have not switched from the accumulation phase to a tax‑free pension account.”

“This might be good for the Treasury coffers, but it’s not good for members. I’m also told that there are thousands who miss out on the Age Pension and other benefits that they are entitled to, simply because they didn’t know who to ask. Or because they assumed their super fund was already doing this for them. We can do so much better,” Jones said..

“As such, we will adopt the review’s recommendation for superannuation funds to expand their provision of advice. We will also provide legal certainty for funds on how to collectively charge for advice.”

“Super funds are well‑suited to safely meeting the needs of their members. They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”