APRA and ASIC issued a joint letter warning superannuation funds and financial advisers that they will take a tougher approach to ensuring the fee for no service debacle is not repeated.
The regulators are taking a more stringent stance on financial advice fees charged without the provision of relevant services, pointing to the controversy exposed by the financial services Royal Commission.
"Trustees should consider all necessary steps to make sure that members are clearly aware of fees being deducted from their account," the letter read.
They want trustees to obtain consumer authorisation to charge the fees on a regular basis and provide ongoing disclosure about what is charged, such as specifics of the adviser's fee.
"Making members clearly aware of the deductions is a step that assists in ensuring deductions are appropriate but in itself, does not, provide adequate assurance.
"Oversight processes by trustees require understanding the circumstances and terms of the authorisation given, and disclosures made to members. Measures should be in place to confirm the services are being provided as agreed to by the member," they wrote.
Furthermore, APRA and ASIC outlined steps trustees must take to ensure they are taking the appropriate oversight of advice fees charged.
The first step involves answering: Are the deductions explicitly authorised by members? Are the deductions consistent with the authorisations and disclosures made to members?
Next, trustees must be aware of circumstances where services are not provided and substantiate if the deductions are consistent with the sole purpose test and in the best interests of members.
They emphasised that "care needs to be taken to ensure that controls do not place undue reliance on assurances or attestations from financial advisers or other third parties given the potential personal conflict of interest that these parties might have in the continuation of fee payments."
The regulators have seen several circumstances in which trustees have instituted arrangements that promote financial advisers acting as a de facto distribution mechanism for funds with an understanding that the adviser may negotiate fees of significant value to be deducted from the member's account.
"This can create additional risks, which will increase expectations about the kind of oversight practices a trustee should be adopting."
They also expect fees deducted from members' accounts and paid to third parties to be reviewed by an independent party.
Both regulators will follow up on trustees' outcome of their review and continue to engage with them on this matter.