Devil is in the detail on advice reforms
The Assistant Treasurer has today announced plans to introduce a new class of advisers with minimal training. Consumer advocacy body, Super Consumers Australia says the proposal lacks detail and risks exposing people’s retirement savings to advice from a poorly trained, highly conflicted new class of ‘advisers’.
The proposal will see super funds recoup the cost of these poorly trained advisers from all super fund members, regardless of whether they use the service. There are no proposed limits on what super funds could charge members for this service. The super industry is already spending $73 million in members’ money every year on these services, and the reforms are likely to see this figure increase significantly.
“This approach encourages super funds to charge fees for no service and flies in the face of the Financial Service Royal Commission reforms to end this practice. We want to see greater transparency on the quality and use of advice delivered this way to prevent people’s retirement savings being drained by low quality advice they may never use. This is a huge win for super funds, it will now be easier to charge their members for conflicted advice,” says Super Consumers Australia CEO, Xavier O’Halloran.
Super funds will also have the option of directly charging members who use these poorly trained advisers. This will likely reduce the cost of providing advice for super funds, but there is no guarantee that these savings will be passed on to members. This comes on the back of an ASIC report released in May this year which found super funds were failing to protect their members from excessive financial advice costs and failing to check if advice was in the best financial interest of members.
“The ASIC findings were chilling, several major super funds were failing to undertake any kind of checking on advice charging and members of 70% of super funds were found with advice fee deductions exceeding $15,000. This is an obscenely high charge, more than three times the average cost of advice. Yet these reforms will put even greater trust in super funds to ‘do the right thing’ in the face of overwhelming evidence that they’ve failed to do this as recently as this year. We want to see greater regulator scrutiny of advice charging and safeguards introduced to protect people from inappropriate advice and charges,” says O’Halloran.
These reforms assume super funds are capable of delivering quality advice, particularly for those planning their retirement. This is despite the fact ASIC and APRA delivered a damning report on the failures of funds to help Australians plan for retirement in 2023. This was consistent with Super Consumers Australia’s own review in 2024 of super fund retirement guidance. This report found super funds delivering advice which failed to help people make the most of their money in retirement. It is also concerning given the systematic failures of super funds to manage basic customer service highlighted by recent regulator activity.
“If the quality of advice currently being delivered by super funds is anything to go by we have grave concerns. Many funds are giving ‘one size fits all’ advice, which would either see people run out of money well before they pass away, or advising people to spread their savings well beyond age 100, unnecessarily reducing their standard of living while they are alive. Super funds have also been exposed for taking over a year to pay people death benefits and governance failures. Is now really the time to give them yet another responsibility they are demonstrably incapable of delivering on?” says O’Halloran.
Super Consumers Australia is calling on the Assistant Treasurer to prioritise the release of the details on the reform package and appropriate consumer safeguards. Including:
- A commitment to preserving the best interest duty in full and resisting urges from the industry to water down the protections which will encourage sales dressed up as advice.
- Greater transparency and protections on the products and topics that the new class of advisers can advise on. For example, its proposed blacklist.
- Greater protections on the cost of advice charged from people’s super to prevent inappropriate and excessive charging.
- An independent review of the quality and use of advice currently being delivered by super funds, to ensure members are getting value for money from the fees they are charged.
- Continue to expand and improve the quality of independent advice sources like Moneysmart.