The member joined the fund in 2002 after receiving advice from a financial adviser. The application form authorised a contribution fee of 4.5 per cent on initial and future contributions. The member pointed out he had not received any financial advice for over ten years, and he now wanted all the contribution fees refunded.
On 31 March 2014 the member contacted the trustee and asked for his financial adviser to be removed from the account. He believed this step would stop the 4.5 per cent fee being deducted, but it did not – hence the complaint to AFCA. The trustee initially refused any compensation but then, as a gesture of goodwill, decided to refund the contribution fees from the date the adviser was removed. The member was still unhappy and so the case proceeded to AFCA.
The AFCA case manager recommended that the contribution fees be refunded from when the Future of Financial Advice (FOFA) regime came into effect; namely, 1 July 2013. The trustee agreed to this suggestion, and it was this later decision which was now under review.
In making a determination, AFCA noted that the fund’s trust deed permitted the deduction of fees, and the 4.5 per cent rate was disclosed in the application form, and the fund’s disclosure document. The welcome letter and initial member statement prominently displayed the adviser’s name and contact details, together with details of the “personalised fee structure”. Annual statements also showed the deduction of contribution fees in the transaction summary as well as the adviser’s name and contact details. The trustee submitted the member had access to advice from the named adviser until his name was removed from the account. The member pointed out he had not actually received any advice.
AFCA held that when the FOFA regime was introduced there was an “expectation that something of value would be provided in return for each fee or charge debited” to a member’s account. Here the member had not received any advice from when FOFA commenced, but before then, contribution fees were allowed and commonly charged. AFCA cannot make a determination that is contrary to law.
However, from the commencement of FOFA there was an industry shift for fees for services and while some trustees elected to continue with the pre-existing arrangements under the “grandfathering rules”, others did not. AFCA held that in its experience, “even those financial firms that did elect to continue with ‘grandfathered’ arrangements are now refunding fees where no advice was provided from 1 July 2013”. In these circumstances, the trustee’s decision to refund the fees from the introduction of FOFA was fair and reasonable. In coming to this decision AFCA also commented that interest should be calculated on the average earning rate on the member’s account during the relevant period.
Case number – 600142 / 28 August 2019
The trustee introduced rule changes to its property option which imposed a 70 per cent limit of a member’s total account balance that could be invested in the option, and introduced an ability for the trustee to freeze the option, for up to two years, in periods of market stress. The latter change was designed to better manage liquidity risk in the property portfolio.
Under regulation 6.34A of the Superannuation Industry (Supervision) Regulations 1994 (Cth), a trustee can be excused from rolling over a member’s account, within the statutory timeframes, if the trustee has disclosed a longer timeframe, and obtained the member’s consent.
The member was invested in the property option and the trustee now needed to obtain his consent to stay in that option in a way that complied with the regulation. In other words, a specific process was meant to be followed. Any member invested in the property option that failed to follow the correct process would have their investment switched to the balanced option.
A significant event notice (SEN) was prepared but not provided to the member as he was not invested in the property option at that time. Notwithstanding this, the SEN was published on the website and a prominent notice was displayed when logging onto the online account. It was not in dispute that the member understood the rule changes and the need to provide consent if he was to stay invested in the property option.
The member went onto his online account but insAtead of clicking on the ‘stay in property’ button he used the standard switch online facility to have 70 per cent invested in ‘Property’ and 30 per cent in ‘Balanced’. This resulted in the member not providing consent in the way designed to meet the legislative requirements. A consequence of this was the trustee moved his property investment to the balanced option as disclosed in the SEN. The member complained about loss of earnings, and the trustee refused to compensate him for that loss.
AFCA held that in circumstances where the member knew there was a specific process to be followed to stay invested in property, but did not follow that process, the trustee’s decision to not compensate him was fair and reasonable in its operation.
Case number – 608902 / 5 June 2019
It was not in dispute that the trustee had made many errors in relation to the member’s investments and pension drawdown. Most of these had been rectified by the trustee in putting the member back into the place she would have been, but for the errors. However, for a short period the member was unable to make online investment switches because her account was blocked while the rectification amount was being sorted out by the trustee. The dispute was around the number of days in which compensation should be paid. The trustee argued for a shorter period than the member.
The member advised that she wished to switch to ‘Cash’ in the first week of October but was unable to do so due to her account being ‘blocked’, and the trustee not advising her of this being necessary while it rectified her account balance. Her login history showed her accessing her account five times on 1 October, once on 3 October and three times on 4 October. On 5 October she telephoned the call centre but did not advise the staff member she wished to change her investment to ‘Cash’. Notwithstanding this fact, AFCA was prepared to give her the “benefit of the doubt” and find her intention was to transfer to ‘Cash’ in early October.
The member was able to access her account and make switches from 8 October, but she didn’t actually make the switch until 19 October.
AFCA decided she should be compensated for the period when she was unable to make an online investment switch to ‘Cash’ without having first been advised by the trustee. With the exception of identifying a small calculation error, this was the shorter period identified by the trustee.
Case number – 600310 / 16 May 2019