Australian superannuation funds will be able to charge embedded advice fees under new proposals approved last week following the so-called Quality of Advice Review (QAR).
The Australian government backed the super advice fee reforms and 13 other recommendations of the total 22 floated in the final report tabled by QAR lead, Michelle Levy, earlier this year.
Super funds have long been constrained from tacking on bulk advice costs in member fees in line with broader industry rules banning investment product commissions in Australia.
But the Australian Treasury release says the “restrictions on collective charging will be amended to allow superannuation funds to provide more retirement advice and information to their members”.
The Australian move is in contrast to NZ where the regulator has voiced growing concerns about bundled advice fees in KiwiSaver schemes.
KiwiSaver schemes are barred from paying explicit commissions but some providers wrap up ongoing adviser fees – of up to 0.5 per cent – in broader administration charges.
But while the super advice fees may be subject to limits once the final details are in place, the Australian consumer group, Choice, has previously warned the QAR proposal to loosen the rules for all institutions could open up the industry to ‘fees-for-no-service’ risks as highlighted in the 2018/19 Royal Commission into financial services.
In a statement, Choice chief, Adam Kirkland, said the full QAR recommendations “would have slashed consumer protections for advice provided by banks, insurers and fund managers were criticised by a broad range of stakeholders, including academics and independent financial advisers”.
However, the Australian Financial Services Council (FSC) is already lobbying to extend the proposed super advice fee carve-out to other sectors as per the final QAR report.
FSC chief executive Blake Briggs, said in a statement: “Superannuation funds will play an important role in providing retirement advice, however if the Government narrowly implements key reforms they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life.
“The Quality of Advice Review’s recommendations for a ‘good advice’ duty and allowing ‘non-relevant providers’ to provide personal advice were designed to have broad application beyond the superannuation sector, to encourage industry investment and ensure a level, competitive playing field.”
Aside from the super reprieve, the Australian government agreed to a dozen other QAR proposals set to ease ‘red tape’ for financial advisers while kicking the remaining recommendations set to ease the way for “advice by other institutions” out for further consultation.
The NZ government, meanwhile, is moving to tighten financial product incentives under the recently Financial Markets Conduct (Conduct of Institutions) Amendment Act – or COFI – regime.
As reported last week, the COFI regulations are now in place.
“Under these regulations, financial institutions and intermediaries will be prohibited from offering sales incentives based on volume or value targets to their employees who are customer-facing and their immediate managers, and to their agents and intermediaries,” the Ministry of Business, Innovation and Employment (MBIE) says in a new release.