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ASIC has just announced it has granted “relief to industry to provide affordable and timely financial advice during the COVID-19 pandemic”. The relief measures specifically target advice around accessing superannuation early, as per the government’s recent contentious policy aimed at easing the financial fallout of the Covid-19 pandemic. The announcement waives the need to provide SOA’s around such advice and gives Australians the opportunity to get financial advice on early withdrawal of their super fund either for free (from their super fund) or for a maximum of $300 from a financial adviser or tax agent / accountant. Advisers we spoke to had a mixed response to the announcement.

As part of its COVID-19 economic response, the Government introduced measures to allow individuals facing particular financial hardship due to the COVID-19 pandemic to access their superannuation early – up to $10,000 in 2019-2020 and a further $10,000 in 2020-2021. To assist the provision of affordable advice on early access to super, ASIC has:

• - allowed advice providers not to give a statement of advice (SOA) to clients when providing advice about early access to superannuation;
• - permitted registered tax agents to give advice to existing clients about early access to superannuation without needing to hold an Australian financial services (AFS) licence; and
• - issued a temporary no-action position for superannuation trustees to expand the scope of personal advice that may be provided by, or on behalf of, the superannuation trustee as ‘intra-fund advice’.  (Intra-fund advice is provided free of charge to the recipient of the advice.)

ASIC’s relief and no-action position are temporary and subject to the important conditions, including:

• - clients must be provided with a record of advice (ROA), which meets certain content requirements. An ROA is a shorter, simpler document that sets out the advice that is being provided;
• - the advice fee, if any, is capped at $300;
• - the advice provider must establish that the client is entitled to the early release of their superannuation; and
• - the client must have approached the advice provider for the advice.

There are other caveats regarding the circumstances about who can qualify for advice which you can read on ASIC’s media release here

Initial feedback from advisers gathered by Adviser Rating regarding the announcement – and the policy in general was mixed. It was generally accepted that on face value, the measures were welcome to help people who are in genuine need gain access to advice. The broad refrain was if it’s a question of paying rent or putting food on the table access to super could help those in critical need.

Accountants Raise Eyebrows
Advisers were wary however on several points. Specifically, allowing accountants to give advice around accessing super early raised a few eyebrows and some stern objections as well. It’s the lack of a holistic approach by accountants that concerned most advisers. One adviser said he’d already had two clients who had been told by their accountants take advantage of the policy and access the $10k. He was aghast, as the accountants seemed to have no idea that taking $10K from the low balances in both funds (of women in their early 30’s) would jeopardise their insurance cover. He lamented that accountants would not know the full picture of the individual, let alone have an understanding of the fund in question and its mechanics.

It was forcefully put by another adviser that accountants should know their limitations and have partnership with financial advisers who they could refer their clients on to.

Regulatory and Cost Issues
Perhaps because of the focus on compliance, the Royal Commission and FASEA rules, several advisers said they would be reluctant to offer this type of scaled advice for fear of accountability if things went pear shaped in the future. They were worries that consumers may find themselves on the receiving end of multiple instances of conflicting advice with accountability in question because of the multiple disclaimers associated with the advice. Some advisers questioned whether their licensees would even allow them to engage in the process.

The other issue raised was that $300 for the advice was simply not a fair reflection ofthe cost of producing the advice. As one adviser put it, “Expecting advisers to meet clients, provide advice, answer a multitude of questions, cover overheads and produce an RoA for a $300 fee is not feasible in my opinion. I won't be offering that type of advice for that type of money.” Most advisers agreed it was virtually impossible to do even a minimum fact find for a client for that kind of fee.

Advisers recognise that we are indeed in unprecedented times and that none of this is normal. However, there was a well-practiced caution from most that said accessing super early should only be done in the most extreme circumstances, after all other avenues had been exhausted.

For CEO of Adviser Ratings Mark Hoven's take on the ASIC announcement, see his article: New Asic Measures -  Tremendous Opportunity or Poison Pill?

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Adviser Ratings

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