Why can’t I use my super to pay for advice?

If financial advice was really a priority for Australia (which it clearly isn’t) the law would permit us to pay for advice using our super. And by that, I mean for any form of financial advice — not just advice related to our super.

But this isn’t the case. And while the Quality of Advice Review (QAR) has recommended some changes to the SIS Act in this regard, they aren’t exactly sweeping reforms that would make advice accessible to the masses.

Recommendation seven states that superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in the fund on the direction of the member.

“The objective of this recommendation is to provide superannuation fund trustees with more certainty about paying advice fees agreed between a member and their financial adviser from the member’s superannuation account and ensure that adviser fees are not paid in breach of the SIS Act and are not taxable benefits for members,” it states.

Ms Levy notes in her final report that the idea of expanding this agreement has been suggested by a few corners of the financial advice community.

“Some people have told us that advice fees, particularly ongoing advice fees, should not be paid from superannuation at all. Other people have suggested that superannuation might be an appropriate place to fund financial advice generally,” she said.

The report also notes that for approximately 60 per cent of advisers, the majority of the fees they charge are deducted from a financial product, and more often than not from a superannuation fund account.

“Good financial advice can add to a person’s retirement income, and it is appropriate that people should be able to apply some of their superannuation to the cost of receiving financial advice about their superannuation, including their retirement income,” Ms Levy said.

“However, I am not persuaded that superannuation should be available to pay for broader financial advice.”

It’s odd that Ms Levy couldn’t be persuaded that super should be available to pay for broader advice, given that it has been used as a convenient kitty for many other reasons.

Back in 2020, the Morrison government made the controversial decision to allow Australians to dip into their super as a form of COVID-19 support. This was on top of an aggressive bond buying program, an official cash rate of 10 basis points, JobKeeper, and God knows how many other inflationary schemes.  

The federal government basically allowed us to use our super fund as an ATM, with little to no governance, and make withdrawals up to $10,000. All because of a virus (that most people are still catching by the way, despite their 42nd jab).

Between April and June 2020, Australians collectively withdrew $20.1 billion from their super. I know for a fact that many people did so for no good reason at all — just because they could. And why not? It’s our money after all. I wish the ATO the best of luck trying to track down where that money went.

The First Home Super Saver Scheme is another example of how super has been used for reasons beyond retirement. In its submission to the QAR, the Association of Independently Owned Financial Professionals (AIOFP) argued that the scheme for home deposits provide precedent for the use of superannuation in this way and the modification of the sole purpose test.

Yet there are no recommendations made by Ms Levy that would allow me to use my super to pay for financial advice more broadly. Not unless the advice being provided relates specifically to my super funds. In which case I’ll probably just go directly to my super fund, which I suppose is the whole point.

Personally, I believe the QAR missed a major opportunity to make advice accessible and affordable here. If Australians could use their super to pay for any type of financial advice, they most certainly would. Just look at how quickly we jumped at the opportunity to blow $20 billion of our retirement fund during the pandemic.