Tranche 2 of DBFO dumps SOAs, enables 'nudges'

The long-awaited Tranche 2 of the Delivering Better Financial Outcomes draft package switches Statements of Advice for Client Advice Records and clarifies what topics super funds can collectively charge for.

- Jamie Williamson and Andrew McKean

The second round of draft legislation, released on March 21, covers three key areas of reform: the eradication of SOAs; the advice topics super funds can collectively charge members for; and allowing super funds to 'nudge' members at key life stages.

SOAs will be replaced by Client Advice Records (CARs); "a principles-based, technologically neutral record that is in plain English and supports the client to make an informed decision about the advice."

The CAR must include the scope of the advice, the advice, reasons for the advice and how it meets the client's objectives, the cost of the advice to the client and benefits received by the provider, and details of the provider including whether they are an authorised representative.

A CAR will not be required in all circumstances, including for small investments below a threshold amount and where the client has already received a CAR and their circumstances have not drastically changed.

When it comes to the advice super funds can collectively charge for, Treasury is proposing they do so where it relates to contributions, investment options, insurance held through super, and retirement income.

In terms of what personal circumstances may be considered in the provision of that advice, Treasury has suggested the member's cashflow and household income, household assets and interests outside of super, financial position of the spouse, household debts and liabilities, and eligibility for government services and payments.

Super funds will not be able to collectively charge for advice where it relates to the purchase or disposal of non-super assets or other financial products, holistic financial planning, and estate and tax planning advice.

Finally, funds will be able to send targeted prompts to members - or 'nudge' them at specific lifestages to boost their engagement with their super.