AFA News 14 April 2022. Following ongoing discussions with both APRA and ASIC on their letters to super fund trustees in recent years on the oversight of financial advice fees, ASIC has prepared an article to explain the background to these letters and the legislative reasons.
In April 2019, APRA and ASIC issued a joint letter to super fund trustees, setting out their expectations for super fund trustees in the oversight of the payment of advice fees from superannuation accounts. We were disappointed by this letter in the use of wording about the ability to rely upon financial advisers and the suggestion that trustees should review Statements of Advice. In our view, for privacy reasons, it was inappropriate for trustees to review SoAs.
The letter also emphasised the importance of compliance with the Sole Purpose Test. We appreciate the importance of the Sole Purpose Test in limiting the reasons under which trustees can authorise the release of funds from super funds, however, we have long argued that the APRA guidance on the Sole Purpose Test, from February 2001, is well overdue for an update.
APRA and ASIC then issued another joint letter on 30 June 2021, providing further guidance around their expectations of super fund trustees. This letter was released in the context of the commencement of annual renewal and client consent obligations. Once again, we were disappointed with some of the wording and the focus on the trustees reviewing SoAs. This letter did provide additional information on the application of the Sole Purpose Test.
The article that ASIC has recently prepared provides some further clarification and emphasises that trustees do not need to review SoAs for all clients and that they only need to do a sample or risk-based check to make sure that services are being provided. They have also referred to the use of an extract of information from advice documents, which we would suggest was much more appropriate, as opposed to asking for copies of the entire SoA.
We recognise the obligations that apply to trustees in the authorisation of the payment of advice fees, and compliance with the Sole Purpose Test, and thank ASIC for drafting this article.
Please click here for a copy of the ASIC article. For any questions, please email policy@afa.asn.au.
Issued 14.04.2022. AFA Policy & Education Update.
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