Advice already paid with super

Some financial planners are already drawing their advice fee from their clients’ superannuation accounts, using a mechanism which has existed for years. 

Perth-based financial planner Wayne Leggett from Paramount Wealth Management told Money Management his clients are asked to sign a fee authority form which permits the planner to deduct money from the superannuation fund. 

“As long as the client authorises the payment, the fee is usually paid,” Leggett said. 

“It is a 'carry-over’ from the days (not too long ago) when entry fees were charged, the quantum of which was often at adviser discretion.” 

Allowing consumers to use their super to pay for advice was one of the calls the Financial Planning Association (FPA) made to the Government in its pre-Budget submission, saying it would increase access to financial planning services. 

The FPA recommended this be done through amending the sole purpose test, using salary sacrifice or government co-contribution - as long as the advice relates to superannuation. 

According to financial services lawyer, Rockwell Olivier’s Peter Bobbin, this practice is in part permissible under the current regime, and the advice doesn’t have to be directly related to superannuation. 

He said some super funds have arrangements or written agreements with their clients which permit them to pay their financial planner by using their superannuation balance. 

“If a person has $250,000 in super and they’re 60, they don’t have enough to live alone on super - they’ll need and be entitled to social security,” Bobbin said.  

“It’s very reasonable to then look at their super balance, investment and strategy in a manner which will supplement the age pension - the age pension is relevant in this context,” he added. 

“This is the case where advice might talk a quite a bit about age pension and that is permissible, provided that you’ve got that link into superannuation.” 

However, if a planner is advising on household budget, then it would be in breach of the Superannuation Industry (Supervision) Act to draw the advice fee from the client’s superannuation balance. 

Compliance and governance specialist Kate Humphries of Pathway Licensee Services said the SIS Act explicitly says that superannuation is there to make sure consumers have enough to live on in retirement. 

“So, unless the advice is very specific to superannuation, it [drawing the advice fee from super] would probably be in breach of the SIS Act,” Humphries said. 

While there is a mechanism for planners to be paid for their advice through their client’s super, Bobbin said the FPA’s proposals would significantly simplify this process and provide much needed clarity.