New changes to superannuation and advice to have a big impact

Super funds will soon be able to give members financial advice in a major change to the rules. Here’s what you need to know about the overhaul.

The Federal Government is again overhauling financial advice and superannuation, in a move that should make it more accessible for everyday Australians.

Some of the planned changes are badly needed after financial adviser numbers plunged in recent years, almost halving in a decade to about 16,000 nationally, resulting in many advisers not taking on new clients and the cost of advice soaring 40 per cent in four years.

It’s worth understanding how the changes will affect you and your ability to get professional help with your finances.

WHY NOW?

The advice industry has been rapidly shrinking following 2017-2019’s financial services royal commission, which highlighted poor practices in financial planning including fees being charged to dead people.

Heavy regulation of the sector has led to advisers being strangled by red tape and the legal requirements to bombard clients with pages and pages of expensive compliance-related documents that very few people read.

Last year’s Quality of Advice review, chaired by Coalition-appointed Allens partner Michelle Levy, made 22 recommendations, and the government says it will immediately adopt 14 of them.

WHAT ARE THE KEY CHANGES?

Super funds will be given a greater role in providing financial advice,

Red tape in financial planning is being reduced, starting with those unwieldy statements of advice.

The government says the rules around conflicted remuneration will be clarified, and transparency improved where advisers receive commissions on products such as life insurance.

Fee renewal and consent forms will be streamlined, disclosure statements on fees for financial advice will be removed, and other administrative burdens will be scrapped.

HOW DOES IT AFFECT YOU?

Put simply, you will be able to ask your super fund for financial advice, and advice won’t cost you the $3500 that many financial planning customers now pay.

Assistant Treasurer Stephen Jones says until now, super funds have been unable to help answer members’ questions such as should they contribute more to their super, their tax obligations, pension eligibility and retirement phase planning.

He says the current rules constrain important questions that need to be asked. “Super funds are well suited to safely meeting the needs of their members.”

WHO’S FOR AND AGAINST?

The changes have generally been welcomed, although there was some criticism that the government did not adopt all 22 recommendations of the Quality of Advice review.

The Financial Advice Association of Australia said it was a strong response to the review, consumer group Choice said it was a “sensible and measured approach”, and the SMSF Association said it was a positive step towards greater access to quality advice.

The nation’s biggest super fund, AustralianSuper, said it would improve retirement outcomes for millions of Australians.

Some see the moves as favouring industry super funds by giving them more ability to offer advice, but ignoring banks and insurers’ hopes of expanding their services.

WHAT HAPPENS NEXT?

Mr Jones says the government is not ruling out any of the remaining eight Quality of Advice review recommendations it did not immediately adopt. It says it will finalise its response by the end of the year.

The rule changes are set to be legislated later this year and early next year.

For super fund members and other struggling to get good advice to grow their wealth, the future looks a little brighter.

Originally published as New changes to superannuation and advice to have a big impact