Super funds spent $1.3bn on financial advice in FY23

Data published on Wednesday by the Australian Prudential Regulation Authority (APRA) shows that advice fees made up around 11 per cent of super funds’ overall $10.83 billion expenditure during the 2022–23 financial year.

Across all categories of advice spending, super funds spent $1.31 billion for the period. Of this number, $1.19 billion was categorised as “financial planning payments to externals” – which includes any expenses incurred for the provision of financial planning payments to external companies or individuals, i.e. not employed by the Registrable Superannuation Entity (RSE) licensee.

A far more modest figure of $43.5 million was attributed to “financial planners expenses” incurred for the provision of financial planners employed by the RSE licensee, while the remaining $73.6 million went to intra-fund advice expenses.

AMP was the top spender in terms of advice fees through Wealth Personal Superannuation and Pension Fund and AMP Super Fund, spending $294 million and $29 million, respectively. The former was entirely allocated to external advisers, while AMP Super Fund’s spending included just under $2 million on intra-fund advice.

This was followed by Macquarie Superannuation Plan’s $213 million, HUB24 Super Fund’s $173 million, and Netwealth Superannuation Master Fund’s $145 million, all of which were also attributed solely to external advisers.

Australian Retirement Trust’s $17.7 million was the largest intra-fund advice spend, followed by HESTA’s 12.4 million, and Aware Super’s $10.7 million.

The data release follows APRA deputy chair Margaret Cole having spoken at the AFR Super & Wealth Summit 2024 on Tuesday, calling scrutiny of fund expenses a “priority frontier” for the regulator amid “growing concerns” about spending behaviour – though this was largely focused on super funds with high discretionary spending on items like travel, entertainment, and conferences.

Fund expenditure will be reviewed and scrutinised with intensity, Cole said, as APRA intensifies its focus on trustees’ compliance with the best financial interests duty introduced by the 2021 Your Future, Your Super reforms.

According to Cole, APRA’s reviews have already uncovered questionable spending, with some trustees lacking the documentation to justify certain expenses. Despite three years under this duty, she said, adherence remains inconsistent.

Cole said that APRA has sifted through over 42,000 lines of data from the 2023 financial year alone to spot outliers and potential misuse.

“Following the evidence”, the prudential regulator identified unusually large or questionable expenditures, prompting follow-ups with trustees and, in cases of serious concern, enforcement action.

As APRA’s data collection grows, now exceeding 50,000 entries for FY24, the regulator anticipates uncovering even more areas of concern.

“As one of my colleagues puts it, we lifted up one rock and found a significant number of concerns,” Cole said.

“Given the sheer scale of the collections, our decision to intensify our scrutiny of expenditure does not mean we plan to review every single expenditure item reported.”

APRA last week signalled it will closely scrutinise trustee expenses where member benefit isn’t immediately evident or reasonably justified. Key areas of focus include discretionary spending on travel, entertainment, and conferences, as well as outliers in spending size and payments to specific types of vendors.