Advice fees alarm: ‘Urgent action required’

Staff at the Australian Securities and Investment Commission (ASIC) appear to be earning their pay lately. After recently announcing a watch on poor advice relating to switching super, ASIC has turned its attention to advice fees. And while one superannuation advocacy group has welcomed this focus, it says it should have come earlier.

On Thursday, ASIC announced it was calling on superannuation trustees to renew efforts to protect members from unscrupulous operators. This comes amid evidence of inadequate oversight of advice fee deductions.

In conjunction with its announcement, ASIC released a report detailing its findings on advice fees. The report, Review of superannuation trustee practices: Protecting members from harmful advice charges, highlights super balances drained through inappropriate advice charges.

“We have issued this report because how trustees approach their obligations matters for their members,” the report’s executive summary says. While acknowledging advice fees being paid out of superannuation as common practice, ASIC expressed reservations about the quality of advice.

“Concerningly, we have identified that in a small but serious number of cases, the superannuation balances of members are being reduced to pay for advice that instead of being helpful is destructive to their retirement outcomes.”

Such an outcome would represent a double blow to members. 

ASIC’s chief concern is deficiencies in the way superannuation trustees monitor advice fee deductions pertaining to this financial advice. The deficiencies originally came to light in ‘fees for no services’ cases heard by the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.

The deficiencies continue to pose risks and cause detriment to members, ASIC contends.

SCA calls for urgent action on advice fees

Following the release of the report, superannuation members advocacy group Super Consumers Australia (SCA) called for urgent action. “Financial advisers and super funds [must] urgently lift their game to protect Australians’ retirement savings from dodgy advice,” it said.

SCA director Xavier O’Halloran said: “It’s appalling that some funds are not closely monitoring fees and deductions from their members’ super. He said it was particularly galling that the deficiencies have continued years after a call for improvement. 

“It is a super fund’s job to protect people’s retirement savings from rip-off fees and services,” Mr O’Halloran said. “But ASIC found that three of the funds they looked at were failing to even do basic checks of adviser fee deductions. This comes despite regulator warnings to improve on this back in 2021.”

Further warnings to consumers

ASIC’s new report was welcome, he said, but the government now needs to take decisive action on advice fees. “It is good to see ASIC shining a light on poor practices. We expect ASIC to now follow up with strong enforcement action against trustees and advisers to deter future misconduct.”

Mr O’Halloran also echoed the government’s call last week for extreme caution when it comes to advice from cold callers. “Unfortunately, people need to be extra cautious about cold calling and malicious click-bait ads on social media. If you’re approached by a cold caller about your super, just hang up. If you see click-bait advertisements on social media, just scroll past.”

ASIC’s full report into harmful advice fees can be found here.

Have you been charged advice fees for what you would describe as harmful advice? What action did you take? Let us know via the comments section below. 

Also read: Why financial advice is worth getting

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