Superannuation Choice, ASIC and Compliance: The 'Choice Regime' Will Have a Significant Impact on Trustees, Employers, Employees and Their Financial Advisers. as Part of Its Professional Education Program, the SIA, Now ISFB, Has Collaborated on a Super Choice Campaign for Advisers and Compiled a Simple Checklist for Advisers and Clients on Super Switching

Article excerpt

The Federal Government's choice of fund policy became effective on 1 July following the introduction of the Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004 (the Choice of Fund Act).

The Securities Institute of Australia (SIA) equipped its financial advisers with the tools to obey the rules on superannuation choice prior to implementation in July. Financial advisers are working in the front line of the new Super Choice regime and CEO, Brian Salter, has noted that 'It's up to advisers to observe the rules laid down by the Federal Government and so protect consumers' retirement incomes'.

The SIA's policy and professional education teams collaborated on a super choice campaign for advisers that includes: a short guide for licensed representatives entitled Super Choice No 'Ifs' No 'Buts'; a seminar series with ASIC participation; and an online professional education program.

Policy and advocacy at the ISFB

The ISFB has a well-developed policy and advocacy function, which is committed to raising standards in the securities and financial services industry by providing practical, contemporary and innovative education, fostering ethical and effective markets, and advocating high levels of professional conduct.

To facilitate its advocacy role, the ISFB has a number of specialist policy committees representing the broad membership of the Institute and reflecting the current legal, regulatory and policy reform issues within the financial services industry. Our Super Choice campaign was steered by the Financial Advising Committee, which is responsible for considering broad and technical policy in relation to superannuation, retirement incomes and financial planning.

Role of ASIC in choice

The Australian Securities and Investments Commission (ASIC) supervises the licensing and disclosure obligations of industry participants. Its primary role in the new choice regime will be to monitor compliance.

ASIC Chairman, Jeffrey Lucy noted on 15 April 2005 that ASIC's aim is to ensure consumer and industry confidence by 'demanding appropriate standards of advisers and fund managers and helping consumers make informed decisions'. He emphasised that financial services providers will be monitored and 'we (ASIC) will take action if they fail to meet their significant obligations under the law. These obligations include the need to provide good professional advice supported by appropriate documentation'.

ASIC will conduct shadow shopping exercises on Super Choice in relation to the advice that consumers receive. As part of this process, ASIC will undertake audits on Statements of Advice and other disclosure documents.

Specific ASIC concerns

Consumers considering switching funds, and advisers on these matters, need detailed information on, and an understanding of, the issues surrounding:

* The default fund;

* The fact that choice of funds is not the same for each employee, as it may depend on the type of fund they belong to, personal circumstances, their award or employment agreement;

* How difficult it can be to compare different funds;

* Possible 'trade offs' required when switching from one fund to another; and

* How fees, charges and investment return can impact on the final payout.

ASIC has indicated that it will release a Guide to Super Switching Advice. In the meantime, the ISFB compiled the following simple checklist for advisers and clients.

The ISFB would not want to see a situation occur like that in the UK where billions of pounds of retirement savings were lost through 'mis-selling' practices after Choice was introduced in 1988. We look forward to continuing our dialogue with politicians and regulators as the choice regime is implemented.

This article is not an exhaustive or technical guide to the law. It is provided for information purposes only. …