Super trustees to expect further advice fee oversight by regulators

The corporate and prudential regulators expect superannuation trustees to have appropriate processes and policies in place by 1 July, 2021, when it comes to charging advice fees.

A letter by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to responsible super entity (RSE) licensees said trustees needed to consider their arrangements for overseeing fees charged to members’ super accounts.

It said members might benefit from financial advice provided through super, and the law permitted advice fees to be charged to members’ super accounts if particular requirements were met.

“Trustees should have taken steps to develop policies and make process changes necessary to comply with the Advice Fees and Independence Act requirements before they commence on 1 July, 2021, for arrangements made from that date and on 1 July, 2022 for all other arrangements,” the letter said.

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“APRA and ASIC will be monitoring trustees’ adherence to the legislative requirements and ASIC instruments’ requirements once they commence.”

It noted in making payments out of a super fund, the regulators expected that trustees had processes in place to ensure expenditure was appropriate. The design of specific oversight practices in relation to advice fees would depend on the advice service model that super funds offered.

The regulators said it was expected that all trustees:

• Had access to the requisite information, systems and suitably qualified people to enable the completion of activities forming part of a robust assurance framework;
• Incorporated, as necessary, specific control testing reviews within annual audit programs; and
• Produced on a regular basis exception reporting on standard processes to ensure any necessary remediation activities can be completed in a timely manner.

“In entering into arrangements with financial services licensees or individual financial advisers to facilitate the payment of advice fees for members, trustees should have regard to the specific issues for assurance processes set out in the attached information,” it said.

“In this respect, trustees who have an understanding of the nature of the business model of the financial adviser will be better placed to implement robust and efficient assurance steps.

“In circumstances where the trustee is not providing financial advice itself, the trustee’s role is to have controls in place in relation to payments made from the fund for advice services. A trustee is not expected to make a detailed evaluation of the specific professional advice provided by the financial adviser.”

The letter was written after examining trustee reviews of their oversight frameworks and practices, identifying cases during the Royal Commission, other relevant enforcement matters, cases that led to remediation processes, and new requirements of the Financial Sector Reform (Hayne Royal Commission Response No. 2) Act 2021 (Advice Fees and Independence Act).