Delivering Better Financial Outcomes Tranche 2A

Clarifying when trustees can collectively charge for intra-fund advice

The Tranche 2A package contains a number of additional rules for the provision of intra-fund advice^[1] which relate to recommendation 6 in the Final QAR Report^[2]. Recommendation 6 recommended the deletion of section 99F and to expressly provide permission to apply fund resources to provide intra-fund advice. Instead, consistent with the Government’s Final Response on 7 December 2023, Tranche 2A responds to recommendation 6 by:

the draft bill amending section 99F to grant regulation-making powers to cover matters such as advice topics and circumstances that can be taken into account when providing intra-fund advice; and

publishing a consultation note which lists proposed advice topics that will and won’t constitute intra-fund advice topics and lists proposed circumstances that can be taken into account when providing intra-fund advice. These lists are not intended to be exhaustive. Where a topic or circumstance is not specified in the regulations, trustees are expected to exercise their judgement in relation to their other legal obligations.

Importantly, the current restrictions on intra-fund advice in section 99F and the sole purpose test continue to apply.

The following table summarises what may change and stay the same under the Tranche 2 package:

This analysis shows that:

Tranche 2A proposes the inclusion of a number of additional laws directed towards to intra-fund advice which are designed to supplement the existing law; and
these proposed additional laws do not appear to increase or reduce the scope of the existing intra-fund advice regime and it is clear that the existing legal requirements continue to apply.

By including additional legislative provisions and ensuring that the current legal requirements apply, these reforms are unlikely to simplify the law or reduce the costs of intra-fund advice. At best, they might increase the certainty of the law in relation to some aspects of the intra-fund advice process.

Nudges and targeted prompts

The Final QAR Report did not recommend nudges, but nudges were identified by the Government as part of its response to recommendation 6 in the Government’s Final Response on 7 December 2023. We now have a better understanding of the proposed regime for nudges.

While the intention of allowing for nudges is to be commended, we question the take up of the new regime. This is because trustees can already provide targeted information to their members without it constituting personal advice, the proposed compliance obligations surrounding the nudges regime are significant (including imprisonment) and the consequences of non-compliance could be significant.

Nudges will effectively be deemed to be general advice, which means that there would be no obligation to comply with the personal advice obligations when sending a compliant nudge. However, the rules relating to spam, direct marketing and anti-hawing would continue to apply without change.

The technical term for nudges will be ‘targeted superannuation prompts’. A targeted superannuation prompt will be a written document that is given by the trustee to a member of the fund, which contains superannuation related advice that is appropriately targeted to a class of members of the fund, and which displays relevant statements and warnings.

A few points can be drawn from the above:

nudges don’t impact the current regulatory settings, so trustees who send targeted communications without personal advice can still continue to do so;
the key benefit of the nudges regime is that trustees can give more specific recommendations to members than under the current general advice framework. This means that the main situation in which a trustee may want to adopt this new regime is where there is a real risk that a member could reasonably consider that a targeted communication contains personal advice. If the risk of the targeted communication containing personal advice is low, a trustee may want to continue to rely on the general advice or factual communications regimes because of their less onerous compliance regimes;
if, for example, the nudge is not appropriately targeted or does not contain all relevant statements and warnings (even if the non-compliance was minor or not intentional), it would not satisfy the statutory definition of targeted superannuation prompt and the communication would not satisfy the personal advice exclusion. The consequences could include breach of all relevant obligations in relation to the provision of personal advice.

The following table sets out the key features of nudges and the proposed compliance regime for them:

Client Advice Records

The exposure draft also proposes replacing the requirement for advisers to provide clients with a Statement of Advice (SOA) with a requirement for Client Advice Records (CAR).

The requirements for when a CAR is required to be provided are consistent with the current requirements for SOAs. The changes in the draft legislation relate to the presentation and certain content requirements, and are set out below alongside the current requirements for SOAs. Notably, a CAR does not have to be given in writing and the draft explanatory materials set out that a CAR could be given in an audio recording or email if it is simple or single-issue advice. The requirements are intended to be technology neutral and responsive to client needs.

	CURRENT POSITION	PROPOSED POSITION	Example uses 2
Matters that can be taken into account when providing intra-fund advice	Arguably, no limits because: sole purpose test arguably limits advice topics only compliance with the adviser’s best interest duty requires an appropriate fact find to be undertaken This reflects the position argued in the Final QAR Report that section 99F does not require amendment to enable trustees to consider all relevant matters when providing intra-fund advice, including matters outside the super fund.	Arguably, no limits: because the sole purpose test and the adviser’s best interest duty continue to apply (subject to Tranche 2B); and the regulations will expressly confirm that the following may be taken into account when providing intra-fund advice: cashflow and income from the member’s household assets and interests held outside super by the member’s household financial position of the member’s spouse eg income, their super debts and liabilities of the member’s household eligibility for government services eg age pension. This list in not exhaustive and advice may meet the collective charging requirements even if it is not in the prescribed list, subject to meeting the sole purpose test.
Advice topics	Section 99F prohibits intra-fund advice on: new members joining the fund a financial product that is not the member’s interest in the fund consolidation of super accounts any topic as part of ongoing advice. Further, the sole purpose test prohibits intra-fund advice being provided on matters outside the member’s interest in the super fund. This means advice on the following topics can arguably be provided if the advice is one off advice and relates to the member’s interest in the fund: contributions investment options insurance in super death benefit nominations TTR strategy retirement products and income. Note that some of these advice topics can be complex (eg TTR advice). As a result, in practice, we are not aware of trustees providing detailed intra-fund advice on these complex topics because it is not in members’ interests as a whole to collectively charge for the higher costs involved in providing complex advice.	The section 99F and sole purpose test restrictions will continue to apply. The consultation note contemplates the regulations expressly confirming that: intra-fund advice can be provided on the following topics: contributions, investment options, insurance in super and retirement income; and intra-fund advice cannot be provided on the following topics: purchase or disposal of assets and financial products outside super, holistic financial planning and estate and tax planning. These lists do not increase or decrease the range of topics that can be provided as intra-fund advice. Further, the proposed Tranche 2A reforms don’t impact the complexity of the advice topics, and so its unlikely that they will increase the likelihood of a trustee providing intra-fund advice on more complex topics.
Implementation assistance	No restrictions on implementation assistance.	Proposed clarification that implementation assistance will not result in a breach of section 99F.
Method of providing intra-fund advice	Over telephone, in meetings, by a digital tool.	Over telephone, in meetings, by a digital tool.

	Relevant features	INDIVIDUAL	Example uses 2
Superannuation-related advice	A communication will only be a nudge if it contains superannuation-related advice, which is a recommendation or statement of opinion given by the trustee in relation to any of the following: the transfer of interests in the fund to other types of superannuation products (the recommendation must not be about the transfer to a particular product offered by the fund); settings relating to making contributions, cover under life risk insurance products, rates of payment for superannuation income streams, changing the investment options offered; the benefits of obtaining personal advice about existing interests in the fund; existing interests in the fund. Further, the communication must not require the member to act on the recommendation within a specified period or before a specified time. Further, it must not contain recommendations or statements of opinion that are not superannuation-related advice – as drafted, this means any recommendation or statement of opinion, even if it does not constitute financial product advice (eg a recommendation to obtain holistic financial advice).
Appropriately targeted if consistent with assessment framework	Trustees are expected to appropriately target nudges to the relevant cohort(s) of members having regard to the likely objectives, financial situation and needs of members of the cohort and, where appropriate, the factors set out in the retirement income covenant (RIC). This approach leverages the trend adopting in the DDO regime, the RIC and SPS 515 of trustees being expected to know their membership base and appropriately divide them into cohorts. In order to appropriately target a nudge to a class of members, trustees will need to develop and comply with an *assessment framework* for the nudge. An assessment framework will need to include: the superannuation-related advice to be included in the nudge; a description of the cohort of members who will receive the nudge and how the trustee selected the cohort; the basis on which the trustee is reasonably satisfied that the advice is appropriate for the cohort; the trustee’s assessment of the likely objectives, financial situation and needs of the members of the cohort; the trustee’s assessment of the risks for the cohort relating to the proposed superannuation-related advice and the steps the trustee will take to manage those risks; how and when the trustee intends to give the nudge; and how the trustee intends to monitor the effect of the nudge, and monitor that the person to whom each nudge is sent belongs to the class before the nudge is sent to them. This assessment framework must be prepared before the first time the trustee sends out a nudge for a particular class of member. There are ongoing obligations for the trustee to take reasonable steps to ensure that the persons who later receive the same nudge belong to the class and continue to be reasonably satisfied that the superannuation-related advice in the nudge is appropriate for the class. Trustees would be required to update the assessment framework where they intend to change the superannuation-related advice contained in the prompt in a material way or make changes to the class of members in a material way.
Record-keeping	Trustees are required to: retain the relevant assessment framework for 7 years from the day the trustee gives the nudge; maintain various other written records in relation to the nudge. Breach of record keeping requirements can result in imprisonment.
Communication mode	Nudges must be provided to members by: sending the nudge to a physical or electronic address nominated by the member; displaying the nudge on a digital platform designed for providing access to the member’s account; or as otherwise prescribed in the regulations. Nudges must not be in “real time” communications and so cannot be given by phone, and it’s unlikely that trustees will be able to provide nudges through chat bots and SMSs.
Opt out provisions	A member may notify the trustee that they elect not to be given nudges by the trustee. The election ceases to be in force after 5 years (or otherwise if the member notifies the trustee that they withdraw the election). It is not clear why 5 years has been adopted, noting that this is different to the standard marketing opt outs which continue until the member withdraws the opt out. Trustees will need to consider how they will explain the difference between two types of opt-outs to members in a meaningful way.

	SOA (current)	CAR (proposed)	Example uses 2
When to provide the advice document	An SOA must be given when or as soon as practicable after the advice is provided. An SOA is not required: For advice on small investments For advice on a basic deposit product or NCP facility for further market-related advice where the advice does not recommend a purchase or sale of the product. The AFS licensee must still provide a record of advice in the above situations.	Tranche 2A is consistent regarding when a CAR must be given, and when it does not need to be given. One notable change relates to the replacement of ‘further market-related advice’ in the current law with ‘further personal advice’ in Tranche 2A. ‘Further personal advice’ is defined in broader terms than further market-related advice and is potentially an expansion of the current exemption from providing an SOA.
Presentation requirements	The title “Statement of Advice” must be used on the cover of, or at or near the front of the document The statements and information in the SOA must be worded and presented in a clear, concise and effective manner The SOA must include as much detail about a matter as a person would reasonably require to make a decision about whether to follow the advice as a retail client	The words “Client Advice Record” must feature prominently in the CAR. The contents must be expressed and presented in a manner that, having regard to clarity, conciseness and effectiveness, is fit for the purpose of assisting the client to make an informed decision on whether to act on the advice as a retail client. On balance, we think it unlikely that the revised clear, concise and effective formulation will significantly impact the length or complexity of the document.
Key content requirements	Statement setting out the advice. Information about the basis on which the advice is given Name and contact details of the providing entity Information about the remuneration or benefit the service provider or associate may receive that could influence the advice. Information about any other interests or associations that could influence the advice. Additional information where advice recommends the replacement of a client’s interest in a financial product with another. If required, a warning that the advice is based on incomplete or inaccurate information.	Statement setting out the scope of the advice. Statement of the advice. Statement of the reasons for the advice, including how the advice meets the client’s objectives, financial situation and needs. Name and contact details of the providing entity. Statement of the cost of providing the advice, which we assume means the amount of the advice fees and not the advice provider’s costs. Information about the remuneration or benefit the service provider or associate may receive that could influence the advice. Information about any other interests or associates that could influence the advice. Additional information where advice recommends the replacement of a client’s interest in a financial product with another. If the CAR is given at the time when the advice is provided, a warning that the advice is based on incomplete or inaccurate information. If the CAR is not given at the time when the advice is provided, a record of the warning that was given to the client must be included in the CAR. We question whether this revised list of content requirements will significantly impact the length or complexity of advice documents. While the CAR is not required to set out the information on which the advice is based or the basis of the advice, it must set out how the advice meets the client’s objectives, financial situation and needs – which implies that those objectives, financial situation and needs must be set out in the advice document.
Inclusion of additional content	No prohibition on including other material, such as educational material and statements and disclaimers to manage risk	Express permission to include other information. In our experience, the inclusion of other content can be a key driver for the length of advice documents so the express ability to include this other information, while welcome, will not result in shorter or simpler advice documents.
Record-Keeping	Record-keeping obligations are currently outlined in ASIC Corporations (Record-Keeping Requirements for Australian Financial Services Licensees when Giving Personal Advice) Instrument 2024/508.	The obligations are unchanged but will be inserted into the Corporations Act. In addition, a 7 year record retention period will be imposed.

Delivering Better Financial Outcomes Tranche 2A – a missed opportunity?

On 21 March 2025, the Government released the next component of its Delivering Better Financial Outcomes reforms (DBFO), which we’ve called “Tranche 2A”. Consultation on the draft legislation closes on 2 May 2025.

Clarifying when trustees can collectively charge for intra-fund advice

Nudges and targeted prompts

Client Advice Records

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