Financial Planning

Advice fee consent and superannuation

08 June 2021

Emma Johnson

Emma Johnson is a lawyer in Cowell Clarke’s Financial Services team, providing advice and guidance to clients including AFSL’s, financial planners and fintech’s on regulatory and compliance matters.

With new regulations on advice fees deducted from superannuation passing into law, it is vital for financial planners to understand their responsibility to demonstrate and record client consent.

Client consent and fees have been a vexed issue in the financial advice industry for some time. The concept is significant and played a central role in many of the recommendations set out in Commissioner Hayne’s final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Some of these recommendations are close to implementation and it is critical that financial planners have an operational understanding of the requirements and their role before the law takes effect.

This includes understanding how new consent obligations will operate in relation to withdrawing advice fees from superannuation both for non-ongoing fee arrangements and ongoing fee arrangements (OFA). The regulatory framework now explicitly requires all stakeholders to obtain, and prove, client consent.

Royal Commission scrutiny of super and fees

The Royal Commission paid close attention to the concept of consent, particularly as it applied to fee transparency and the failure to provide services for fees. In his final report, Commissioner Hayne raised serious concerns regarding similar behaviours witnessed in relation to superannuation funds. Many superannuation fund members were unaware of fees, charges and deductions being charged or whether they should have been provided with services associated with these costs.

In Commissioner Hayne’s view, this was a consequence of conduct failures on the superannuation trustee’s behalf – weak governance, poor risk management and a lack of oversight for policies and procedures. A lack of regulatory vigour was also a factor and social attitudes towards superannuation were mentioned as having a role to play in this issue.

By design, contributing to a public-offer super fund is largely a process of ‘setting and forgetting’. Who can unlearn Paul Keating’s sentiments towards superannuation – both through the nineties and also recently – super is not to be withdrawn until required. Although sage advice, it has contributed to the general disengagement towards super for many consumers.

A fund member will generally engage with their super when it becomes apparent that impending retirement might make that nest egg not only useful, but necessary. With limited interest in their mandated retirement savings in the preceding years it is not surprising that consumers did not questions this conduct.

Written consent

The recommendations from Commissioner Hayne’s final report continue to filter through the financial services industry. The most recent changes relates to OFA requirements and the introduction of the obligation on a superannuation trustee to obtain, or be provided with, written consent from a member, before allowing deduction of fees from a member’s account. This requirement applies either for both ongoing and non-ongoing fee arrangements.

A ‘non-ongoing fee arrangement’ is one that is not an on-going fee arrangement. An ongoing fee arrangement is an arrangement for the provision of personal financial services (including personal advice), under which a fee (however described or structured) is to be paid during a period of more than 12 months.

Fees charged to members to cover intra-fund advice are specifically excluded from the requirement to obtain written consent, leaving the transparency of the intra-fund advice model open to further criticism.

These changes take effect from 1 July 2021.

Whose obligation?

The super trustee has the obligation to ensure written consent from a member is received before allowing deductions for advice fees pursuant to the Superannuation Industry (Supervision) Act 1993 (SIS Act).

As such, the obligation falls on the super trustee. However, the advice provider will be collecting the relevant consent from clients and providing it to the super trustee. ASIC has assumed as much in its example written consent document. Of course, these obligations overlap with the adviser’s other obligations to obtain client consent to ongoing fees and their ethical obligations under the FASEA Code of Ethics.

Content requirements

The content requirements for written consent in non-ongoing fee arrangements largely parallel those seen in the new OFA regime. ASIC’s website helpfully provides example templates for both non-ongoing fee arrangements as well as OFA’s. As with other, more familiar disclosure documents such as Statements of Advice and Product Disclosure Statements, written consent must be worded and presented in a clear, concise and effective manner.

A failure to comply with the SIS Act can be subject to both civil and criminal penalties. If funds are released without the consent of the super member, then the contravening party is the superannuation trustee. Of course, the advice provider has parallel obligations. However, if advice providers receive fees contrary to these provisions and without the consent of the relevant super member, then the advice provider is likely to be in breach of Corporation Act provisions.

Seeking and proving consent

In an effort to rectify the issues the Royal Commission uncovered in relation to fees paid by passive super members, the regulatory framework now explicitly requires all stakeholders to obtain, and prove, client consent. This will require a robust client engagement process and framework – not only must financial planners meet black letter law requirements and satisfy superannuation trustees, but they must also be satisfied that client consent is informed, and freely given, in accordance with the FASEA Code of Ethics.

Super trustees and advice licensees will have their own slant on how these requirements are implemented. While some may insist on wet ink signatures and original documents as the gold standard, it seems to us that clients will benefit from a technology driven approach.

The new obligations re-emphasise the super trustee’s role as gatekeeper in the superannuation system. Given the ever-increasing pool of superannuation funds and the effect that pool has on the Australian marketplace (both at a corporate and individual level), that role is ever more crucial.


Emma Johnson is a lawyer in Cowell Clarke’s Financial Services team, providing advice and guidance to clients including AFSL’s, financial planners and fintech’s on regulatory and compliance matters.