The trustee becomes the gatekeeper: what legislated advice fee caps mean for practices that charge from super

Buried in the middle of the reform package Daniel Mulino announced on 19 August is a measure that will change the mechanics of advice delivery more than the new class of adviser, and it has attracted a fraction of the attention.

Superannuation trustees will be placed under a legislated obligation to cap the advice fees they deduct from member accounts. Self-managed funds are exempt from the cap, though they will be required to disclose to the ATO how much they pay in advice fees each year.

For any practice that charges an ongoing fee against a client's superannuation account, and that is most of them, the practical effect is that a third party now sets a ceiling on what can be charged and is legally accountable for enforcing it.

How the fee became the problem

The measure did not come out of nowhere. It is the endpoint of two years of regulatory findings that trustee oversight of advice fee deductions has been weak.

ASIC's Report 781, published in May 2024, reviewed ten trustees covering roughly eight million members and $923 billion in assets. It found more than $990 million in advice fees charged across over 476,000 member accounts. Three of the ten trustees reported not checking any advice documents, whether on a risk basis or at random. Fee caps as high as $20,000, or 5 per cent of a member's balance, were in place, with few controls protecting members with low balances.

ASIC returned to the subject in June this year with a report criticising platform trustees on advice document oversight, fee cap monitoring and investment holding limits. One case study recorded a platform trustee performing 21 risk-based checks over almost 18 months, with an adverse finding rate of 75 per cent.

The Super Members Council has run alongside those findings with its own analysis, pointing to a $1.1 billion surge over two years in total advice fees deducted from super accounts, with five platforms accounting for $815 million of it. The council's framing links that spike to a rise in super switching and argues for global caps and minimum balance thresholds.

Then came Shield and First Guardian, where the deduction of advice fees from a member's balance after a switch became part of the machinery that moved roughly $1 billion of retirement savings into two failed schemes.

Key point: The cap is the compromise position. What Treasury actually consulted on was considerably broader, and several of the discarded proposals are still available to be revived in drafting.

What Treasury proposed

The August announcement is the softer landing of a consultation that opened on 8 April and closed on 22 May, one of three concurrent papers covering trustee member protections, CSLR sustainability and lead generation.

The trustee paper went further than a cap. It proposed prohibiting advice fee deductions altogether for advice relating to switching funds, imposing an obligation on receiving funds to review advice fee deductions when they occur, and asked whether platform-specific restrictions were needed to address conflicted payments linked to product listing, preferred placement, continued availability or member inflows. It also contemplated doubling the relevant penalty exposure, from $792,000 to $1,584,000.

The switching fee ban drew broad opposition, and not only from advisers. The FAAA argued there is no basis for banning advice fees from super accounts for switching advice, and that a ban would create problems for consumers, competition and costs across the superannuation sector.

Australian Retirement Trust opposed the ban and argued members would be worse off. General manager of advice licensee services Evan Poole told Professional Planner that "as a general rule, advised members can end up better off", tracing the position back to Sunsuper's decision more than a decade ago to work with the adviser community. Notably, ART is advocating for trustee-led caps rather than a single industry standard, which is a meaningfully different position to the one its own lobby group holds.

The Super Members Council also declined to support an outright ban, but pressed for caps. Chief executive Misha Schubert has argued that where fees come directly out of retirement savings, controls must ensure they are "always fair and reasonable".

The Stockbrokers and Investment Advisers Association said it would monitor the cap obligation closely. Chief executive Maria Lykouras made the point that the Corporations Act already provides a consent mechanism for deductions and that advisers are already subject to the best interests duty.

The part advisers should be modelling

A legislated cap is better than a switching ban. It is not a neutral outcome.

The immediate question is what the cap is set against. A flat dollar cap, a percentage of balance, or a hybrid produce very different outcomes for different books. A percentage cap disadvantages practices serving lower-balance accumulators, which is the cohort the entire reform agenda claims to be trying to reach. A flat dollar cap disadvantages practices doing complex work for larger balances, which is where fee-for-service pricing is most defensible. If ART's preference for trustee-led caps prevails over a universal standard, a practice with clients across six platforms will be operating against six different ceilings, with six sets of documentation requirements behind them.

The second question is enforcement. A trustee that is legally accountable for the cap will build controls to protect itself, and those controls will be applied to advisers. On the evidence of ASIC's own reports, most trustees are starting from a low base and will be building quickly. Expect more advice document requests, more risk-based file reviews conducted by parties with no relationship to the client, more rejected fee consent forms, and longer processing times. The FAAA has already spent considerable effort on the narrower problem of missing account numbers on consent forms. That is a preview of the administrative texture of what is coming.

The third is competitive. The same package that makes trustees the gatekeepers of adviser fees also permits those trustees to employ a new class of adviser and to charge for a wider set of intra-fund topics collectively. A trustee reviewing an external adviser's fee is a trustee reviewing a competitor's pricing. Nobody has suggested bad faith, and the conflict is manageable, but it needs to be named and it needs governance around it before the obligation is drafted rather than after.

What to do now

Model your fee structure against a plausible cap range before consultation on the draft legislation opens, and be able to articulate what a given client is paying for. Practices that can evidence the work behind the fee will find the trustee review process an administrative burden. Practices that cannot will find it an existential one.

Audit consent documentation across every platform your clients hold. The failure mode under section 962G(2) has always been that a defective consent terminates the arrangement automatically. Under a legislated trustee obligation, that failure mode becomes a great deal more likely to be detected.

And engage on the drafting. The measure has been announced, not introduced. The details still open, the basis of the cap, whether it is universal or trustee-set, and what evidence a trustee may demand, are the details that will determine whether this is a compliance adjustment or a repricing of the entire advice-through-super model.