ASIC’s Kirkland clarifies SOA checking concerns

Despite fears under the first draft QAR bill, ASIC has confirmed that it does not expect superannuation trustees to check every Statement of Advice (SOA). 

Under the first Delivering Better Financial Outcomes bill, introduced into Parliament in March, there are revised requirements for superannuation fund trustees processing financial advice fees.

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Namely, the legislation sets out a number of requirements that need to be satisfied before a trustee can charge the cost of advice against the member’s interest in the fund.

In its initial response to the proposed legislation, the Financial Advice Association Australia (FAAA) stated this was their main area of concern.

“This legislation places specific obligations on them [super fund trustees] before advice fees can be paid (under a new subsection, 99FA, of the Corporations Act). There is no clarity as to how these obligations will be met by trustees,” FAAA CEO Sarah Abood said in March. 

“The risk we see is that this could cause significant extra work for financial advisers who may be asked to provide additional specific documentation, such as Statements of Advice and invoices.” 

Speaking at an FAAA roadshow in Sydney on 3 May, Abood once again drew attention to the concerns around the amendments the bill would make to the Superannuation Industry (Supervision) Act (SIS Act).

“There’s some concern that the new wording of this section, section 99FA, will require super trustees to audit every piece of financial advice where a consumer has asked the trustee to pay their advice fee,” Abood said.

“We don’t believe that that was the intent of the legislation. But we think it’s important that that be resolved because otherwise we’ve got the issue that we might be robbing Peter to pay Paul here. That we’re saving red tape and cost in one area and we’re creating more somewhere else.”

Also speaking at the event, ASIC commissioner Alan Kirkland assured delegates that the corporate regulator does not see a need for superannuation trustees to verify every SOA.

“We’ve been trying to provide some early guidance in relation to the issue … around the obligation of superannuation trustees, to clarify that under those proposed reforms, as under the current law, it’s ‘not our view’ that super trustees are required to check every statement of advice and we’ll continue to do our best to make that clear,” Kirkland said.

However, Kirkland did note that ASIC’s role is not to make policy decisions or design legislation, but it does “assist Treasury through that process”.

“We also then provide regulatory guidance once legislative reform has passed. And the point of that regulatory guidance is to help people and the entities we regulate to understand how to comply with the law,” he said.

“I know a lot of you will be interested in whether we’re going to be producing updated or expanded regulatory guidance once the Delivering Better Financial Outcomes reforms are passed through the Parliament.

“That’s something we’ll make a decision on once those reforms have passed in full, and we’ll be consulting with stakeholders like the FAAA to understand where there might be a need for us to better elaborate how we think the law applies and where our areas of focus are likely to be.”

Problems with s99FA

However, FAAA general manager of policy, advocacy and standards, Phil Anderson, who also spoke at the roadshow event in Sydney, said that s99FA took super fund trustee obligations to “another level”.

Under the proposed new version of s99FA, “the trustee or the trustees of a regulated superannuation fund must not charge against the member’s interest in the fund the cost of providing financial product advice, unless the financial product advice is personal advice and is wholly or partly about the member’s interest in the fund and the amount charged does not exceed the cost of providing financial product advice about the member’s interest in the fund”.

According to Anderson, advisers are often providing advice that “goes above and beyond the member’s interest in the fund”.

“That’s saying that the super trustee needs to know what advice you are providing and the extent to which that advice relates to your client’s interest in the fund to make sure that the fund is not paying for advice that is unrelated to their interest in the fund,” he explained.

“How exactly do they do that? That’s where we’ve come to the situation where some of the funds are asking for copies of SOAs and you guys have got to go through and redact personal information that you don’t think should end up with a trustee.

“It’s been quite an unworkable model and we do think there needs to be a better solution. So, we’re strongly opposed to trustees looking at advice documents that contain personal information. This is a privacy issue. We believe that it’s also an administratively inefficient process.”

Anderson also put forward alternative proposals for super trustees, such as a sample-based method, or a licensee or adviser attestation model.

“Maybe we need to have to move away from focusing on SOAs to focusing on letters of engagement that don’t contain that personal information,” he said.

“Another key point that we make, and we make this strongly, is that for any client who has already met a condition of release and transferred their money to retirement phase, they are entitled to take that money out when they wish. If that’s the case, then why should trustees need to check that it met the sole purpose test?”