ASIC looks at reasonableness of super advice fees

The Australian Securities and Investments Commission (ASIC) has detailed the manner in which it is looking at financial advice provided within superannuation funds including whether the fees charged are reasonable.

The regulator has signalled that it is looking at the fees deducted from superannuation fund member balances and whether they are actually fair.

Under questioning by the Parliamentary Joint Committee on Corporations and Financial Services, the regulator has made clear that it is looking to impose a consistent approach to advice fees across the superannuation industry.

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ASIC commissioner, Danielle Press told the committee that the regulator was looking at the fees issue alongside insurance inside superannuation, including claims handling.

“We're looking at advice in superannuation, in particular around where fees are deducted from superannuation funds and whether or not they are reasonable, and whether or not the services are actually being delivered for those fees,” she said.

“We're also looking at the disclosure of costs and fees, and trying to get some form of consistency across the industry around what is actually taking out of these funds appropriately or inappropriately,” Press said.

Press said that ASIC did not mandate fee levels and she did not believe it should, but that the regulator wanted to make sure that fees that were being withdrawn from funds were reasonable and fair.

“…but we are not setting a limit on the fee level as such; it's more about ensuring that the deduction of the fee is a reasonable fee to deduct,” she said.

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Does that include the reasonableness of $13,200 pa in investment fees (without any advice provision) in the CBUS Growth Fund where a member has $1.6 million invested? Which can then be stolen by a Bitcoin outfit (see yesterdays news], because there is no servicing adviser keeping an eye on the funds?

Thanks for pointing that out Steve. Advisers arent allowed to charge asset based fees and we actually do something and provide a service to clients. Fund managwers dont provide any service to the client and are allowed to continue to charge different members different amounts depending on the level of investment. Why cant there be the same set of rules for everyone?

Also index funds charging a asset based fee? There is no background work done by humans here. Its done by a computer algorithm and costs nothing to run.

Asset based fees should either be banned or allowed in all cases. These fund mamagers should at least be forced to get clients to opt in every 2 years

Rather than have a grey area, why does ASIC not commit to the number that they want. One persons reasonableness is different than another, just the perception of value and all other personal characteristics non quantitative. Let them choose the amount rather than guess and be caught out. Like having 1 one to choose from and then saying it is not the answer I am looking for. Go figure

Hey gang of seven, what are you implying? ASIC has idea no of the amount of work involved in servicing individual account holders. Our businesses are being monstered as I write. If it gets to the stage where regulator interferes with my income as a self employed financial planner, then it is time to hang up my shingle. I pay a fee to ASIC, fees to TASA, fees to the FPA, fee to my licensee. ASIC must realise that you cannot get consistency across the field. People are very happy to pay for peace of mind. Consider Steve's valid comment.

Yep. Karen Chester, deputy chair of ASIC, blames a lack of competition in banking and superannuation for delivering "unfair" consumer outcomes and impeding the economy's growth. Funny how she doesn't comment on how she is collecting millions off advisory practices, for ASIC fees for no service. Love to know how long ASIC would last, if they had to chase up voluntary Opt-Ins.

I'm sure they will run out of paper again like they did with the RC submission on trailing commission ceasing issues, leaving out the important bits!

......." ASIC did not mandate fee levels and she did not believe it should"....
But we will oversee the fees and determine if they are fair and reasonable and then intervene to ensure we will eventually drive down advice fees to an unsustainable point and where the vast majority of super members will not receive any form of advice.
If a client had $500,000 in their superannuation and had nominated 4 beneficiaries all of whom are classified as dependents but are no longer tax dependents and the member has no understanding of the tax consequences to these beneficiaries in the event of their death, what is the real value to that member and the beneficiaries if the adviser identifies this important issue immediately and explaining the potential outcome so the member is fully informed ?
If the tax upon upon the members death was reduced by 30K, 40K or 50K by altering the nomination to their spouse, rather than the adult children and provision made within their Will for the adult children etc, what is that advice worth?
This is the type of real world value advisers deliver every week of the year and this is also the type of advice that may be remunerated via grandfathered commission allowing the member access to advice year round at a cost that in the vast majority of cases is reasonable and fair.
Many members do not realise the differences between Binding and Non Binding Nominations, Lapsing Non Binding and Lapsing Binding etc etc and why would they?
That's why the abolition of legally approved grandfathered commission payments is wrong and will restrict a large number of members from being able to access valuable personal advice at a reasonable cost.

You are flogging the dead horse of grandfathered fees

No mate, commission payments are alive and doing very well indeed, it is just shifting from Independently owned Financial Planning practices providing Personal Advice to directly employed call centre staff and will be paid as a salary/wage with room for bonuses and trips to the Tennis - deducted from ALL member accounts. No more compliance of Personal Advice, just sell product. Thanks for your help Hedware if as you say you have a role in policy - well done.

What an utterly mind-blowing stupid response.

Actually, no its a pretty accurate account. I work for an industry fund and receive part of my remuneration based upon a sales based approach.

Dear HP, Perhaps I am mistaken, but I thought with FASEA that remuneration based on sales was not acceptable. Do you understand how this is working in reality?

my response is directed at Hedware’s comment

Actually it is 100% correct. Glad to see more advisers are starting to work out they're being stitched up by the Union Super funds (at last).

Thanks HP and Steve. One would have to be very blind to reality miss these changes - AMP is a clear example. IF AMP can pull off the transformation of taking clients from privately owned Financial Planning practice back into institutional/trustee advice of old, then AMP will I suspect have a big advantage to generate investment returns going forward. They are going to consolidate 70 plus products to about 5, so less choice but importantly, less cost to AMP. AMP can then take all the listed property assets and go unlisted - starting at a until price at market value (unit price of 1.00). Then the fun begins - just keep pushing those unlisted values up and up, just enough to keep the Industry Funds pushing their values up even further (and I suspect industry Super has already pushed their values too high). AMP can essentially push the Industry Fund - just enough to get APRA to report Industry Funds as under-performers perhaps. How far can Industry Super push the values - who knows? Will Industry Super fight back - yes, and AMP is a listed company - Industry Super is not. Big disadvantage for AMP.

But one thing is clear, Personal Advice WILL be replaced by employed staff. At least if I am employed by the Trustee I will have no conflicts - as my duties will be made very clear - sell the fund of my employer only.

HP, thanks for the honesty. Not to pointed at you personally. But the mind boggles at how we got here and the blind eyes that must being turned. You can't script this stuff.

Yep. They have confirmed this is in the mix going forward. The fun begins..
Non-aligned advisers are going to have some fun on the ground educating their clients about all of these shanigans.
Already some are shocked at the admin fee racket (for no service) that is going on already.

"If the tax upon upon the members death was reduced by 30K, 40K or 50K"
There it is. The government want that 30 - 50k in their revenue account (tax) So if they legislate us out of existence then their fees go up. ASIC would call that conflicted remuneration if it were an adviser.
But they will argue it's in the clients interests. Really?

ASIC has an agenda to terminate financial planner revenue every way possible.

They will not be investigating industry fund fees of course, they are a protected species.

ASIC is corrupt and need to be investigated, both past and present staff and commissioners.

You have to wonder about their lack of bias, give who they awarded their Default Super fund to.

I suspect that ASIC's idea of reasonable fees will be for adviser to put together no more than a 15 page SOA, take no more than 5 hours to produce @ $10 per hour.
They already think most of us should work for nothing..
And it will be like beauty, it will be in the eye of the beholder !

It'll be alright they'll run out of paper before the investigation is finished

The client should decide if the fee is reasonable, not ASIC. Their obsession with financial advice fees needs to end. This is FASEA's job now. ASIC should turn their attention to the job that should always have been number one on their agenda - preventing fraud and scams. ASIC are a rotten failure in this space, demonstrated by the ease in which a 21 year old was able to extra $10M plus of Aussies life savings under their watch. Not to mention all of the other scams we continue to hear about almost on a daily basis.

No doubt Danielle Press wants Advisers out of the picture. After all, when you sit on the board of a Robo Advice company why would you want Advisers in your way.

The Danielle Press conflict seems incredible to me I can't actually believe the government would allow it. The whole notion of ASIC is overseeing a system with conflict, and yet here it is seemingly allowing it.

Clear case of conflict of interest which is NOT acknowledged on her information on the ASIC site.
How can ASIC have someone in that capacity when there is a potential influence at play that may result in a benefit flowing to an organisation she represents as a board member ?
Does Danielle Press receive a board payment from Six Park ?
If so, this is unacceptable.

So, I have a fat bastard diabetic prospect who sees me to amalgamate his 12 super funds into one super fund. how much am I allowed to charge to search for and then research the 12 super funds to give advice? The clients only ask for super advice, but as an ethical adviser, I suggest we need to discuss his insurance needs as he has a few super funds with insurance attached and as a fat bastard diabetic, if he just rolls over his super to the cheapest on, he will lose insurance that he can't ever replace. So if I recommend a rollover of all his super funds into one, will I be able to charge the SOA fee, which includes insurance advice and 12 implementation fees to the one super fund?

The SoA will need to be clear concise and effective so with 12 replacement super products plus 12 replacement insurance products you should be able to get it done in around 80 pages but unfortunately will fail at to just send them a link to a few industry funds and let them provide general advice

Relax. The ATO will cancel his cover anyhow, when all of his funds are transferred to consolidated revenue & the member won't even get a switching statement of advice about loss of insurance Won't be too long before we have countless stories like this on A Current Affair/7.30 report, & our gutless politicians will be forced to take responsibility for this mess created by a group of clueless bureaucrats who've never had to run a business at a profit in their lives.

I wonder what ASIC will deem a fair fee, when I quote a client to "find" and research 12 super funds at say $150 each. Then they find out that 4 are closed and of the eight remaining 3 have account balances of under $200. Are they going to assess fair in hindsight or fair upfront? So....Regarding an implementation fee, do I charge a flat dollar fee for all 8 rollovers or a % of FUM?

Under the FASEA Code of Ethics from January 1 next year, all financial advisers are expected to consider whether fees charged to clients are fair and represent reasonable value for money. Shouldn't that requirement alone make the costs of this ASIC research unjustified?

I'm now convinced that ASIC, Govt and Left Wing Do Gooders believe that people are so stupid that they are unable to make decisions for themselves.

Victorian senator James Paterson questioned whether the Australian Securities and Investments Commission should be making decisions about how to spend public money, which was the job of Federal Parliament. In particular, granting $40 million in payouts to activist lobby groups. ASIC needs to be investigated.

amazing stuff, political interference, where is democracy? Gone the way of the USA

Now you know why Hedware seems to have so much time on his hands.

We are all just pawns in the political game of chess!

Id imagine this person also wouldn't know that advice fees were tax deductable to the super fund?Oh billions in fees, actually its billions in tax deductable fees for the funds, in reality most clients only pay 85% of the ASF itself. Whereas Member fees arent tax deductable to the persons fund even though these are used to pay aligned planners! So who's ripping off who you silly sausage wow these people are so inept and so bias, its very partisan, they are trading in virtue ethics, its very unethical. There you go kaplan I used some of the new course content.

It's like shooting fish in a barrel. Only problem, we're the fish. Smart fish fight back.

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