Super account advice fees a sticking point for advice bill: Senate inquiry

The government committee tracking the implementation of the Delivering Better Financial Outcomes (DBFO) reforms emphasised in its final report it wants "greater legal clarity" to how advice fees are deducted from superannuation fund accounts.

The Senate Economics Legislation Committee, led by chair senator Jess Walsh, tabled its final report today.

The bill, Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024, was introduced in the House of Representatives and read for a first time on March 27.

The committee discussed 11 recommendations from the DBFO's predecessor, Michelle Levy's Quality of Advice Review (QAR), which form the basis of the bill. These included suggestions to consolidate administrative steps in obtaining clients' consent to ongoing fee arrangements and provide flexibility in producing the Financial Services Guides.

Recommendation 7 in which Levy asked to provide more certainty to trustees about the deduction of adviser fees from members' accounts, however, dominated much of the inquiry's final report.

This points to section 99FA of the Superannuation Industry Act - the cost of financial product advice that are fees charged to member concerned - which will be amended if the bill is passed.

The law states that trustees must not directly or indirectly pass the cost of providing financial product advice on to the member unless it agreed to by the member; the trustee passes on the cost with a member's written consent; and an ongoing fee arrangement exists.

Walsh wrote that while the committee supports the intent of Recommendation 7, trustees should nevertheless "not be obliged to check every piece of financial advice as the bill simply codifies current practice into law."

Many stakeholders who submitted feedback to the inquiry referred to the sole purpose test to achieve greater clarity.

The Stockbrokers and Investment Advisers Association (SIAA) in its submission was concerned that proposed changes to section s99FA will establish an excessive obligation on trustees to ensure that advice and fee arrangements are compliant with the sole purpose test.

ASIC said in its submission that amid potential changes to s99FA, "it is not our view that the provision would require trustees to check every statement of advice".

AustralianSuper wrote it supports the proposed amendments to section 99FA.

"We acknowledge that they clarify existing legal obligations and in doing so, help ensure that payments from members' accounts for advice are consistent with the sole purpose test and reflect the services provided to members," the super fund said.

It is also advocating for the consent requirements to include information that will confirm the extent to which the advice relates to the member's interest in the fund.

Committee members and senators Andrew Brag and Dean Smith said the proposed changes to s99FA fails to achieve the aim of the QAR and that the Albanese Government should "take it back to the drawing board."

"By removing Section 99FA in Division 1 of Schedule 1 from the Bill, speedy passage of the rest of the Bill through the Senate and the House can be facilitated," they recommended.

Draft regulation of the first tranche of the Delivering Better Financial Outcomes reform package is up for consultation until July 8.