Super funds raise post-merger advice fee ‘grandfathering’

Superannuation funds have raised the question of whether financial advice fees can be “grandfathered” when superannuation funds undertake mergers via successor fund transfers.

The question of fees “grandfathering” has been raised by the superannuation funds in the context of the Australian Prudential Regulation Authority’s (APRA’s) current consultation process around enhancing superannuation transfer planning.

It also comes as superannuation funds continue to announce merger agreements many of which see them changing the means by which they provide financial advice.

In a submission to APRA, the Association of Superannuation Funds of Australia (ASFA) has raised the need for clarity around the transition of a range of products and services provided by superannuation funds, not least insurance and financial advice.

With respect to financial advice fees, it said that “consideration will need to be given [to] whether existing member advice fee arrangements can be grandfathered into the receiving fund”.

The issue of advice fees is technically significant based on fund to fund differences in the way in which they handle adviser remuneration.

On the equally complex area of insurance, it said “agreement will need to be reached with the receiving insurer with respect to existing insurance benefits, term and conditions, premiums and auto acceptance for customised employer insurance arrangements and defaults for future new employees”.

Elsewhere in its submission, ASFA makes clear that its member superannuation do not want the regulator imposing specific obligations on them around the possibility of fund mergers that might never actually occur.

“New obligations will divert resources from day to day business activities, and improvements to member outcomes, towards planning for events that may never occur. It is difficult to see how this is in the best financial interests of members,” the submission said.

“Members have suggested that trustees should not be required to plan transfers where there is not a reasonable likelihood of there being a trigger for a transfer.”