Choice of Super - Warning to Business
26/04/05
According to Neil Cassidy, General Manager of Tasplan Super, the commencement of choice of super legislation brings with it a significant compliance burden that many employers are yet to fully comprehend.
In addition to the stated requirements to hand out Standard Choice Forms within prescribed time limits and to keep a range of records for at least 5 years, business also needs to be aware of a number of related regulations and laws which are a little less obvious - but every bit as onerous.
One of these ' related laws' is the Federal Government's Financial Services Reform Act ( FSRA ), which sets down a strict code of conduct and a structured licensing regime with respect to the provision of financial advice.
Employers often express concern about the amount of regulation prescribing what they 'must do', but there is just as much black letter law ( like the FSRA ) telling them what they 'shouldn't do'.
Inevitably, choice of super will give rise to a range of questions in the minds of employees, and not surprisingly, many will turn to their employer for advice.
Unless licensed to do so, Employers must not provide their employees with financial advice.
Whilst this might sound reasonable , the regulator's definition of the word "advice" is all - embracing and severely restricts what an employer can and can't say to employees about their super.
According to the Australian Securities and Investment Commission (ASIC) , financial product advice is any recommendation or statement of opinion that:
- is intended to influence a person in making a decision in relation to a financial product or class of financial products; or
- could reasonably be regarded as being intended to have such an influence.
According to Cassidy, by just offering an opinion or making a favourable comment about a particular financial product, an employer could be in breach of the FSRA!
"We have all been guilty at some stage of giving our friends, family and colleagues our opinion of banks, credit cards and the best types of loan to get - all based on our own life experiences." Cassidy said "Often such advice is solicited and our response has been provided in good faith."
"Under the Government's Financial Services Reform (FSR) Act, you are legally bound not to provide such advice - unless licensed to do so!"
"If an employee, for example, asks their Payroll Manager about the administration fee of a super fund, the latter can say that the cost is $1.60 per week - this would not constitute financial advice. However, if the Payroll Manager went on to say that the administration fee was quite low, then this could be deemed advice under FSR, as an opinion is being expressed."
The Government's objective is to protect employees against receiving unqualified, unlicensed and poor advice. The FSR Act is also expected to reduce the incidence of litigation arising from unqualified advice.
Employers are permitted to provide facts and information about a super fund - but not to provide an opinion!
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