Advisers, retail super funds slam financial advice reform bill

A coalition of 12 industry bodies says the proposed reforms on financial advice will lead to poorer outcomes for consumers.

A coalition of 12 industries bodies has criticised the government’s proposed advice reform bill and is calling for a portion of it to be scrapped for the time being.

A coalition of 12 industry bodies representing financial advisers, stockbrokers, investors, accountants and superannuation trustees has railed against the Albanese government’s proposed advice reform bill, warning it will lead to poorer outcomes for consumers looking to access financial advice.

The so-called Joint Associations Working Group is understood to have written to the Senate Economics Legislation Committee this week, raising concerns about proposed amendments to the Superannuation Industry (Supervision) Act that it says will increase red tape for advisers and potentially lift costs for consumers.

The criticism centres around new obligations on superannuation trustees that the working group argues would require them to individually review every statement of advice, both raising the legal risk for trustees and placing a further regulatory burden on financial advisers and licensees.

The working group is calling on the government to remove the first part of the bill related to the proposed amendments to Section 99FA of the SIS Act and return, following consultation with industry, with an updated proposal when it moves forward with the second stage of the financial advice reform package, expected later this year.

“The requirement for superannuation trustees to verify each piece of advice individually is impractical. This measure drastically increases administrative costs, which will inevitably be passed on to consumers, reducing the value of their superannuation savings,” the working group wrote in a letter obtained by The Australian. “The current provisions inadvertently limit the ability to charge for general advice services, contrary to the policy objectives of the Quality of Advice Review. This restriction reduces access to crucial financial advice for many super members, impacting their ability to make informed financial decisions.”

The amendments, as part of the first stage of the government’s Delivering Better Financial Outcomes bill, would have a chilling effect on advice accessibility, the working group warned.

“The increased compliance burden and potential legal risks may lead trustees to stop facilitating advice fee deductions from members’ accounts altogether. This outcome would severely restrict consumers’ access to affordable, high-quality financial advice funded through their superannuation,” it said.

The group consists of the Boutique Financial Planning Principals Association, CFA Societies Australia, Chartered Accountants Australia and New Zealand, CPA Australia, the Financial Advice Association of Australia, the Financial Services Council, the Financial Services Institute of Australasia, the Stockbrokers and Investment Advisers Association, the Institute of Public Accountants, Licensee Leadership Forum, the Self Managed Super Fund Association and The Advisers Association.

ASIC commissioner Alan Kirkland in May said the regulator had been trying to provide early guidance “to clarify that under those proposed reforms, as under the current law, it’s not our view that super trustees are required to check every statement of advice and we’ll continue to do our best to make that clear”.

In the letter to the senate committee, the group call for, at a minimum, amendments including allowing deductions for both personal and general advice, ensuring continuity with existing legal provisions, clarification in the legislation rather than in the explanatory memorandum that trustees are not required to check every individual piece of advice, enabling them to maintain a risk-based compliance approach; and ensuring the law preserves current tax practices relating to advice fee deductions and provides clarity on GST treatment.

Included in the letter is senior counsel advice that warns the drafting of the bill undermines the government’s policy goal of providing legal certainty for super trustees when charging financial advice fees to fund members.

Industry funds are more supportive of the legislation, with Super Members Council CEO Misha Schubert saying it was in the interests of Australians for the legislation to be fast-tracked.

“Super funds already must satisfy themselves that advice charged out of super accounts is about the member’s super – that’s the official guidance from regulators right now,” she said. “And as the legislation’s updated explanatory memorandum makes crystal clear, funds can meet their obligations using risk-based and sampling approaches to checking advice – just as they do today.”