QOA proposal risks turning funds into ‘simple savings accounts’

Deducting advice fees from super funds risks undermining the system, a co-founder of financial services institution has said in response to a Quality of Advice Review recommendation.

Recommendations 6 and 7 of Allens lawyer Michelle Levy’s Quality of Advice (QOA) review proposed reforms targeted at better integrating the provision of personal financial advice with superannuation services.

If accepted by the Albanese Government, Recommendation 6 would enable trustees to provide personal advice to members regarding their interests in the fund.

Recommendation 7 would enable super fund members to dip into their account to pay for the services of an independent adviser.

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The proposed changes were welcomed by super industry stakeholders, including Aware Super CEO Deanne Stewart, who said the changes would serve member’s best interests.

“By expanding the range of topics on which a superannuation fund can provide advice for their members, and at the same time allowing consumers to direct their superannuation fund to pay advice fees to an independent adviser from their superannuation savings, independent reviewer Michelle Levy has put the interests of consumers first by allowing the consumer to decide who is best to provide them the advice they require,” she said.

But according to Muzzammil Dhedhy, co-founder of Hejaz Financial Services, enabling members to deduct advice fees from their super account risked undermining the super industry’s core service.

“Prior to COVID-19, superannuation was approached as a long-term, accumulative ‘don’t touch it’ style asset,” he said.

“This has given way to a new shift in mindset where Aussies are being encouraged to use their super for other reasons.

“We don’t want to defeat the whole purpose of our superannuation system and start treating these funds as simple savings accounts.”

Dhedhy called for further industry consultation, aimed at “striking the right balance” between the cost of advice and the long-term sustainability of the super industry.

However, Dhedhy welcomed the broader scope of Levy’s work— making advice more affordable for Australians.

"It took a long time for the advice sector to emerge from the Wild West of the 2010s and while Michelle Levy's proposals will help shift the industry in the right direction, we still have some way to travel before we reach the objective of making financial advice more affordable,” he said.