In a letter to all RSE licensees today, ASIC and APRA noted that cases of financial advice fees being charged without the provision of the relevant services have recently been the subject of inquiry by the royal commission.
Separately, the two regulators have identified a range of industry practices in relation to trustee oversight, many of which fall below the standard they expect.
“A number of these matters are the subject of enforcement investigations or actions. This raises concerns about some trustees’ risk governance, capabilities and culture, as well as their ability to appropriately manage conflicts of interest,” they said.
“All trustees must have in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees and other charges are deducted from members’ superannuation accounts.
“Accordingly, APRA and ASIC expect all trustees to be reviewing the robustness of their existing governance and assurance arrangements for fees charged to members’ superannuation accounts, and to address any identified areas for improvement in a timely manner.”
The regulators expect these reviews to be substantially completed by 30 June 2019.
“Should such reviews uncover any significant issues or deficiencies in the risk management systems and processes of trustees, our strong expectation is that trustees give urgent consideration as to whether a reportable breach has occurred, and if so, whether it has been escalated in a manner that will ensure appropriate remediation takes place,” they said.
Issues to be considered in oversight practices
ASIC and APRA believe there is a range of issues in relation to the deduction of financial advice fees that trustees need to consider and address through appropriate oversight processes including the following:
1. Are the deductions explicitly authorised by members? Are the deductions consistent with the authorisations and disclosures made to members?
2. Have services been provided?
3. Is the deduction consistent with the sole purpose test?
4. Is the deduction in the best interests of members?
APRA and ASIC said they expect that the accuracy and appropriateness of fees and other charges being deducted from members’ accounts for payment to third parties would be periodically reviewed by an independent party who could provide such assurance.
“Oversight of the deduction of fees to third parties from member accounts is an important responsibility of superannuation trustees and must be given appropriate ongoing focus,” the regulators said.
“APRA and ASIC will continue to engage with trustees in relation to the robustness of their policies and practices for management and oversight of such fees charged to members’ superannuation accounts and reserve the right to exercise our powers in relation to any subsequent enforcement action required.”
