The Financial Advice Association Australia (FAAA) has called for updates to the sole purpose test to reflect changes under the Quality of Advice Review for super funds to provide advice.
The sole purpose test states super funds need to be maintained for the sole purpose of providing retirement benefits to its members.
But in the Quality of Advice Review, released last December, super funds will have the added ability to be able to provide advice to their members and the paper provided information about how and what funds will be able to charge for this advice.
Responding to the discussion paper on enhancing member outcomes, the FAAA said payment of advice fees from a super fund will come under APRA’s jurisdiction and that there is uncertainty about how the apportionment of fees complies with the sole purpose test.
Currently, advice on debt, spouse’s circumstances and entitlements to the age pension will be inconsistent with the test.
Existing guidance was also written in 2001, long before the Hayne royal commission and at a time when commission was the predominant form of payment for advice.
FAAA chief executive, Sarah Abood, said: “If APRA does not provide guidance after such substantial additional changes, trustees will individually make decisions as to whether fees for certain types of advice are appropriate, or not.
“This will inevitably lead to major differences in approach across the superannuation sector, leaving members of one fund in a position where their advice fees can be paid from their superannuation, whereas members of other funds will not have this option.”
The FAAA also recommended the test should be clarified to make it clear it does not apply to “unrestricted non-preserved funds” and where the member has met a condition of release and funds are in the retirement phase.
She concluded: “We recommend that APRA does update the guidance on the sole purpose test and specifically updates it to address issues relevant to financial advice fees.
“Greater certainty with respect to the application of the sole purpose test will be beneficial for clients in having certainty regarding how they can pay for their advice, for advisers in efficiently arranging payment for their services, and superannuation fund trustees in processing payments for financial advice.”
