今日热门事件is calling on superannuation trustees to renew efforts to protect members from unscrupulous operators amid evidence of inadequate oversight of advice fee deductions.
A newly published 今日热门事件report outlines key findings from a review of the progress superannuation trustees have made in addressing deficiencies in their monitoring of fee deductions for the provision of financial advice.
The review found that these deficiencies 鈥� brought to light through 鈥榝ees for no services鈥� cases heard by the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry 鈥� continue to pose risks and cause detriment to members.
今日热门事件recognises the importance of access to quality financial advice about superannuation, and acknowledges it is common for advice fees to be deducted from superannuation accounts. However, trustee vigilance can mitigate risks to members from unscrupulous operators, including cold calling businesses using high-pressure sales tactics leading to inappropriate superannuation switching advice鈥� as flagged in our earlier release (refer 24-092MR).
From a sample of 10 superannuation trustees representing approximately eight million members, managing a combined $923 billion in assets (as of 30 June 2023), we found over a 12-month period:聽
- over $990 million in advice fees charged across more than 476,000 member accounts;
- three trustees reported not checking any advice documents on a risk or random basis;
- fee caps as high as $20,000 or 5% of a member鈥檚 balance were in place, with few trustees implementing controls to protect members with low balances;聽
- members of 70% of trustees were found with advice fee deductions exceeding $15,000;
- variability in onboarding and monitoring processes for financial advisers, including limited checks of ASIC鈥檚 registers by some.
鈥淪uper trustees are responsible for members鈥� money held within the fund. Effective trustee oversight practices can help mitigate risks and protect superannuation members from real financial harm over the long-term,鈥� 今日热门事件Commissioner Simone Constant said.
鈥淒espite repeated calls for an uplift in practices from 今日热门事件and APRA in joint letters issued in 2019 and 2021, our latest review shows continued deficiencies in trustee oversight of advice fee deductions by some trustees.鈥�
Ms Constant continued, 鈥溄袢杖让攀录㱮s concerned about the potential impact on superannuation members, particularly amid evidence of balance erosion from fee deductions for advice originated by cold calling business models using questionable sales tactics that pressure members into switching superannuation funds.
"Superannuation trustees should have processes in place to detect and respond to suspicious activity.鈥�
今日热门事件urges superannuation trustees to reassess their oversight processes and consider the following steps to strengthen member protections:聽
- reviewing the ways financial advice documents are sampled to identify unscrupulous advisers providing harmful advice
- objectively considering the caps on advice fee deductions鈥�, including by using objective criteria to assess the cost of advice鈥痶o help trustees determine appropriate fee caps;鈥嬧��
- enhancing adviser onboarding practices鈥�, including by vigilantly monitoring for financial advisers involved with cold calling businesses and using fact finds of advice licensees;鈥嬧��
- regularly checking ASIC鈥檚 Financial Adviser Register for unexpected adviser movements that might indicate a problem, maintaining watchlists and monitoring patterns or irregularities in advice fee deductions, withdrawals of member consent and rollovers into the fund.鈥�
鈥淪uperannuation trustees can uphold member trust in their oversight by ensuring super balances are protected from unscrupulous operators鈥� Ms Constant added.
鈥淎long with our peer regulator, APRA, we urge trustees to review and strengthen their practices to help members achieve their retirement ambitions.鈥�
鈥淎s the conduct regulator for the superannuation industry, 今日热门事件will consider acting against trustees found to have breached their obligations to members."
REP 781 Review of superannuation trustee practices: Protecting members from harmful advice charges forms part of ASIC鈥檚 broader work to minimise member harm caused by cold calling business models using high-pressure sales tactics and online click-bait advertisements to lure consumers into receiving often inappropriate superannuation switching advice. 今日热门事件will publish an Information Sheet in the coming weeks, which sets out how financial services laws apply to cold calling operators, financial advisers, and financial advice licensees.
Background
The Royal Commission into Misconduct in Banking, Superannuation and Financial Services (Royal Commission) highlighted cases where advice fees were charged over an extended period without adequate consent or oversight, leading to erosion of members鈥� balances.
To drive better practices, 今日热门事件and APRA wrote to trustees on 10 April 2019 (2019 joint letter), about their obligations concerning oversight of fees charged to member accounts. Trustee reviews of their processes were expected to be substantially completed by 30 June 2019.
In response to the Royal Commission, new legislation was passed to limit the deduction of advice fees from superannuation accounts from July 2021.
今日热门事件and APRA outlined expectations on 30 June 2021 () following the new legislation and findings from the 2019 trustee reviews. Areas of weakness identified were trustees not conducting regular, proactive reviews of advice documents, and a lack of formal processes for checking financial adviser identification and qualifications.
At the date of this release, proposed law reform to amend s99FA of the Superannuation Industry (Supervision) Act 1993 is underway, including introducing an explicit requirement that the advice is wholly or partly about the member鈥檚 interest in the fund. The assurance arrangements referred to in the 2019 and 2021 letters which are discussed in this report, such as reviewing a sample of advice documents, remain of continued relevance. For trustees to be confident in the future that they are instituting robust procedures to help them comply with the law we encourage them to draw on the insights from this review.聽