‘Ambiguous drafting’ could cost advisers: FSC

In its submission responding to the legislation, the Financial Services Council (FSC) discussed the matter and said the legislation should not be passed until this issue is resolved.

The legislation sets out multiple requirements that need to be satisfied before a trustee can charge the cost of advice against a member’s interest in the fund. This includes an assurance that the financial product advice is personal advice and is wholly or partly about the member’s interest in the fund.

“The legislative changes in Schedule 1, Part 1 of the bill relating to legal basis and appropriate and justified oversight of adviser fee deductions by superannuation trustees from member accounts, which the FSC supports, are defective,” the FSC said in its submission.

The organisation is particularly concerned about the requirement for advice to be charged on a cost basis which, it said, is contrary to proposals initially put forward by reviewer Michelle Levy.

“The amendments inadvertently, through ambiguous drafting, have the potential to force superannuation trustees to reject advice fee deductions on the basis that they are not charged on a cost basis, in effect meaning financial advisers risk not being paid the fair market price of their advice.

“The amendments restrict the ability to charge for advice services provided through general advice, which was not a stated policy objective of relevant recommendation of the Quality of Advice Review.

“The impacts of these unintended consequences may be that some superannuation trustees will decide not to facilitate advice deductions from members’ accounts where the adviser is independent of the superannuation fund.”

Removal of the ability for super fund members to fund financial advice through their superannuation account will have a “chilling effect” on consumers being able to receive professional financial advice.

Possible impacts include increased red tape, restricted access to independent financial advice, reduced advice provided to superannuation fund members and will undermine consumer access to professional financial advice, all of which go against the original intentions of the Quality of Advice Review.

The FSC recommended the legislation to be amended so superannuation funds and financial advisers have clarity that advisers can receive their market price for the financial advice they provide, and that an advice fee paid in accordance with member consent is treated as expense of the fund.