AIOFP. GREED AND CONTROL – THE TRUSTEE QUESTION

This is a must read for Advisers to understand and appreciate the massive understated change currently underway across our Industry and the Adviser Profession.

As a consequence, there is a second major structural change taking place to the Adviser operating model where greed and control are yet again the motivating factors.

This time however the emphasis is not on culling Advisers from the Profession like from 2015 but taking control of the Advisers practice and client base by captivating the role of the Trustee function within product manufacturing and management.

Ignore this development to your peril, for decades the role of the Trustee has been trivialised and even ignored by many as an unnecessary non-descript functionary of our Profession –this in no longer the case.

The first major structural event happened over 10 years ago when the Financial Sector Council [FSC] convinced the FPA/AFA to cooperate with then Minister Kelly O’Dywer to implement LIF/FASEA/Grandfather Rev ban/compliance legislation, a complete disaster for all stakeholders including consumers.

A truly horror time in the history of the Adviser Profession, it may get worse.

As we all know, these events resulted in at least a 50% reduction in Adviser numbers and huge increases in the cost of advice and risk insurance cover. This time around the brilliant Financial Institutional strategist FSC are not focused on culling Advisers but taking control of the Advisers practice and client base by stealth.

In fact the FSC are actively trying to recruit Advisers into their Institutional dominated membership – a bold and impudent strategy to conceal their intentions.

The First Guardian/Shield [FGS] failure has fundamentally changed financial advice in political terms and it is now responsible for the emerging structural change to Advice delivery.

This time however the Adviser Profession can make a significant difference to the outcome by making a principled decision to reject an emerging conflicted operating environment.

Unlike the horror period 10 years ago, we were captive to legislation that forced change, Advisers now have a choice to reject the direction and protect themselves, their clients and their practice.

The only pleasing FGS failure aspect is the change of attitude and focus by ASIC on the other stakeholders involved with the failure but in doing so it has awakened a sleeping giant dating back to the Magna Carta in 1215 where the role of the Trustee was first defined.

Below is a historical analysis by Academic and long-term Adviser Lionel Rodrigues who is currently completing his PHD in Legislative Instruments covering the duties of the Trustee over the centuries.

The Trustee role is extraordinarily powerful in law and originally designed to be an independent power acting in the best interests of the members of the entity is was representing. Over the centuries this role has gradually changed to where today the preferred model of the Retail Platform operators is to also act as the inhouse Trustee entity working closely with the platform management – a profoundly conflicted arrangement that should be banned.

Owning the Trustee role not only allows a second clip of the FUA ticket but control of every aspect including Adviser clients, Advisers and all functions.

Up until the FGS debacle, the Trustee and other stakeholders were never held to account for product failure, the low hanging fruit Advisers were always targeted. This allowed the Trustee and other stakeholders to ‘clip the ticket’ of the FUA pool in what could be largely described as a ‘fee for no service’ outcome because these stakeholders were rarely questioned about their supposed ongoing duties.

This now explains why ASIC where so forceful with the Netwealth and Macquarie management over the FGS failure, they were also the Trustee and essentially responsible for the conduct of the rogue FGS advisers.

These circumstances explain why the retail Platform operators are now dictating terms to Advisers about them owning and controlling the Advisers clients, the composition of the APL and controlling all client communications.

The in – house conflicted Trustee arrangements currently dominates the market and will continue unless Advisers only deal with Platforms that have an independent Trustee. This is the only defence Advisers have against retail Platform Managers who have already indicated their intensions; it is all about them protecting themselves, controlling product distribution, Advisers and their clients.

We will be writing to all Politicians, ASIC and APRA suggesting that product manufacturers including Platform Managers cannot be both the Manager and the Trustee, it is a profoundly conflicted relationship and not in the best interests of Consumers or Advisers.

How can a Trustee efficiently discharge their obligations to the members of a Superannuation fund if the Management and Trustee are legally and politically linked? Where are the checks and balances?

How can an Adviser get fair treatment from an officious Manager if they are the Trustee as well?

Dealing with Financial Products who have an independent Trustee will not only protect Advisers and their clients but force change over time. If the Adviser Profession ‘rolls over’ with this issue and does not push back, the consequences will be severe.

If you have current clients in a conflicted platform structure, we suggest the following action –

• Get your client to inform Platform Management [which includes the Trustee] in writing that they want all future correspondence directed to them by Management to be shared with you their trusted Adviser.
• Your client to also give written permission to Platform Management that you their Adviser should always have access to their information until otherwise informed.

This message puts Management on notice about you the Adviser has the relationship with your client and educates your client on the circumstances going forward if unexpected events occur.

The table of conflicted relationships are –

• AMP – NM Super Trustee, wholly owned subsidiary.
• CFS – Avanteous Ltd,  wholly owned Subsidiary.
• Fiducian – Fiducian Portfolio Services – wholly owned subsidiary
• Hub 24 – HTFS Ltd – wholly owned subsidiary.
• Netwealth – Netwealth Superannuation Services – wholly owned subsidiary.
• Macquarie – MIML – wholly owned subsidiary.

The only major Platform with an independent Trustee is Dash.

Below is the response from Lionel about the critical role of the Trustee for your consideration…..

‘You have asked me to further consider the position of Trustees, particularly those of platforms.

Chapters 4 and 5 of the Magna Carta of 1215, established duties of assets by guardians which formed the precursor to what we now regard as the modern fiduciary duties and obligations of a trustee. Whilst the actual word “trustee” was not used in the Magna Carta, it codified the legal accountability of those persons acting as stewards of assets for others and established the concept of a “fiduciary relationship”. For over 600 years, the Law of Trusts was established via precedent case law. That changed in 1850 in England, with the advent of the Trustees Act, designed to regulate and codify the fiduciary duties of trustees.
The modern professional financial adviser has fiduciary “like” duties. The trustee of a superannuation fund has a fiduciary duty which is absolute. There is a formal presumption at law that a trustee has a fiduciary duty. Such a duty compels the trustee to act only for the benefit of the beneficiaries. This duty cannot be abrogated. This duty cannot be delegated, specifically so under the Latin addressed doctrine of “delagato non delegatus”; a trustee cannot delegate what has been delegated to that trustee.

From the brief dialogue above, the trustees of a superannuation fund have a “best interests duty” covenant under s52(2) of the Superannuation Industry (Supervision ) Act 1993 (SIS Act). This section was replaced by the Superannuation Legislation Amendment (Trustees Obligations and Trustee Standards Act 2012, ( the TOPS Act), effective 1 July 2013.  The covenant is best expressed as the trustee has a duty” to perform the trustee duties and exercise the trustee powers in the best interests of the beneficiaries. The duty is owed to the beneficiary members of a superannuation fund and not to that of the platform.

There is limited case law as to the statutory meaning of the covenant however ASIC is breaking new ground in prosecuting trustees at the present time. Currently ASIC has been successful in prosecuting their case against Macquarie and Netwealth on the basis these platforms had internalized their trustee structures and responsibilities. There appears to be an apparent conflict. It is difficult for a professional adviser and consumer to separate the duties and obligations of the relevant allegedly conflicted parties.

The regulator’s action against a trustee is instructive. In ASIC v Equity Trustees Superannuation Pty Ltd ATF AMG Superannuation and Simpler Superannuation [ File Number VID 107/2025, 26 August 2025]. There are a number of parties and allegations.
ASIC allege that this trustee;

• Failed to exercise care, skill and diligence under s52(2)(b) of SIS.
• Failed to exercise trustee powers in the best financial interests of the members , being  52(2) SIS.
• Failed in the exercise of due diligence in delivering, offering and  reviewing regularly, each investment offered, s52(6) (b) SIS.
• Failed to promote the financial interests of beneficiaries , s 52(12) SIS.
• Failed to comply with the prudential standards required by APRA under s34C of SIS.

ASIC is also prosecuting under APRA provisions; Superannuation Prudential Standards (SPS) 530, requiring a trustee to assess risks and to stress test those risks. Also, it alleged that the trustees breached SPS 31, which requires a trustee to consider; material business activity”, the impact of failure, ability to meet regulatory requirements, consider potential losses to beneficiaries and a process to regularly monitor performance.

The regulator, ASIC, is also prosecuting the trustee under s912 A (1)(a) Corporations Act in that it is alleged that the trustee failed to do all things necessary to ensure that the financial services delivered by the trustee AFSL, was provided “efficiently, honestly and fairly”.

The above may help give the professional financial adviser a brief overview of the importance of the separation of duties and functions as between a trustee and a platform, and the absolute fiduciary duty that a trustee of such a superannuation fund has to the beneficiaries, being the members of the superannuation fund.

Lionel will be speaking on this critical issue at the Bali Conference.

The BALI event is CLOSED and the hotel is nearly full, if you are joining us you had better book a room ASAP – go to the website.