Collective charging of super fund members for full financial advice is already prohibited, which will make the introduction of new similar obligations unnecessary, according to the Association of Superannuation Funds of Australia (ASFA).
In its submission to the Australian Securities and Investments Commission regarding the updated record-keeping obligations for Australian Financial Services Licensees (AFSLs), ASFA wrote that keeping records of the cost of intra-fund advice – including details about the method of calculation – would require new systems and processes.
ASFA added that significant time and effort would be needed to comply with the requirements in proposals B1, B2 and B3 for arguably little regulatory benefit, because super funds are already prohibited from collectively charging for full advice under the Superannuation Industry Supervision (SIS) Act.
“Once a decision is made to provide advice that cannot be collectively charged for, trustees should not have the additional burden of recording how much that individual advice costs,” ASFA’s submission read.
It said funds have little or no incentive to undercharge for non-intra-fund advice, as these costs will be borne by the trustee or reflected in increased administration fees.
These record-keeping requirements will increase costs in an environment where funds are already being stretched to pay the costs associated with Stronger Super and building up the operational risk reserves required under the Australian Prudential Regulation Authority (APRA) Prudential Standard over a relatively short time frame, according to ASFA.
“We submit that, instead of being required to calculate and keep records of how much each piece of non-intra-fund advice cost, it should be sufficient for the licensee to maintain records of the aggregate cost of providing non-intra-fund advice and how much was charged in total
for the provision of that advice,” the association said.
This would be sufficient to meet the desired regulatory / policy outcome – that of evidencing whether non-intra-fund advice is being charged for correctly and is not being cross-subsidised by fees received for intra-fund advice. There is no need for this to be done on a case by case basis.”
Furthermore, ASFA has pointed out similar aggregate information would be reported to APRA by RSEs as part of the new APRA data reporting standards, which will provide a “valuable source of data for the purposes of reasonableness checking”.
