Minister for Financial Services, Stephen Jones, has said he did not expect the backlash to changes around advice deduction for super trustees and believes the second tranche will have greater impact.
Changes to advice fee deductions by super fund trustees were announced in the first tranche of the legislation but faced backlash from multiple parties.
The legislation sets out multiple requirements that need to be satisfied before a trustee can charge the cost of advice against a member’s interest in the fund. This includes an assurance that the financial product advice is personal advice and is wholly or partly about the member’s interest in the fund.
However, associations and law firms believe it could put trustees at risk and could mean advisers aren’t paid a fair price for their advice. The Financial Services Council (FSC) previously described the “chilling effect” it would have on consumers being able to access advice, while the Financial Advice Association Australia (FAAA) said it would create “significant extra work” for financial advisers.
Speaking on a webinar with the FSC, Jones said he initially expected the change to be “non-contro”.
“What we are attempting to do is affirm the status quo practice, not to change it. So where funds have arrangements with advisers for the payment of advice fees in relation to retirement income, we want to ensure that status quo is maintained and supported by the law.
“We are not trying to upset the law or change existing practice. We thought we got it right but need to draw the regulator into the conversation and nail it.
“I saw this as something that should have been non-contro.”
He said he is more focused on the second tranche of legislation which he expects will have a significant effect on the industry with its proposed changes. Released last December, this will cover areas such as advice being provided by banks and super funds, the replacement of Statements of Advice with an advice record, and a new class of “qualified adviser”.
“The big piece of work that will make a significant difference is the next tranche of work and I want to focus love and attention on that.
“The amount of work we need to get done between now and May, including in the advice space, I want to get this done. That’s not to diminish the issue [of the super trustees], but I want to impress the pressure we have upon us in delivering that big piece and getting that through.”
By having trustees supervise client directed payments from their pension funds, Stephen Jones and the federal Labor government are changing the core principal that when someone moves their super to pension fund, they have full access to their money. And he didn’t expect a backlash?
It has only started Stephen. You can make a case that accumulation accounts with preserved funds can have trustee oversight, but no case can be made for you inhibiting clients access to pension funds. And the Liberal government would be wise to alert the public that the Australian Labor Party want to control retiree access to their pension funds.