Trustees drop the ball on advice fee oversight

In line with the government's push to tighten the gap in oversight on financial advice fee deductions from super funds, a solution provider is observing a spike in trustees reaching out for expertise, but highlighted the move is not to assess the quality of advice provided.

Coinciding with other major announcements made at the National Press Club in August, minister for financial services Daniel Mulino said he intends to legislate an obligation for trustees to implement and enforce advice fee deduction caps for members.

ASIC also noted its focus on trustees to "monitoring of risks to retirement savings", according to its report REP 833 Safeguarding super: How well are platform trustees monitoring risks to retirement savings, released in June. The report highlighted advice document checks were insufficient despite the previous guidance signalling trustees' need to improve oversight of advice fee deductions on both a risk and random basis.

Out of the six major trustees examined, half of them reported at least one month where no checks were undertaken.

Speaking to Financial Standard, Fourth Line chief executive Joel Ronchi said the expectation on oversight for advice fee deductions has always been in place but was only emphasised from the recent collapses of the Shield and First Guardian Master Funds.

Ronchi said the advice fee reduction aspect falls into one of the many priorities trustees are handling currently, but the focus is certainly growing based on increased dialogue over the past six to nine months.

"Trustees are reaching out to me to have a chat [but] nine months ago, that was not happening," he said.

"[The collapses of] Shield and First Guardian were a big wake-up call for a lot of trustees, and not just about advice fees, but the entire platform shooting match... [Trustees] will have to be more thorough in terms of the way they check everything."

He clarified trustees "are not evaluating advisers' quality of advice", instead they are looking if the procedural steps were fulfilled accordingly. Like, if a correct consent form has been completed in line with requirements, or if fees were disclosed properly, and more.

"If any of those [criteria] was lacking, the super trustee will ask for more information around those areas. It's got nothing to do with the adviser being assessed by the super trustee about the quality of their advice," he said.

"It's simply an evaluation of the advice fee process that's been implemented by a given adviser."

Ronchi also noted the constrain on compliance within an organisation that continues to be human led, but innovation is slowly emerging to be a cost-efficient solution.

"With systems building out at Fourth Line and the scalability of AI... It's now a question for super trustees having a carte blanche in terms of what kind of advice fee oversight they want to implement," he said.

The solution provider said implementation is not difficult as the foundational platform has already been finalised and functional, but integration depends heavily on how an organisation wants to map the infrastructure, where the process can take up to 12 weeks to complete.