The intra-fund advice matrix

ASIC guidance

There is not a plethora of guidance around the nature and parameters of intra-fund advice. In a helpful note entitled 'Clarifying intra-fund advice,' 4 December 2020, the Australian Securities and Investments Commission (ASIC) makes a canonical statement that: "Intra-fund advice has no special status over other personal advice." This followed on from ASIC Report 639 'Financial advice by superannuation funds' (REP 639) in December 2019, that explored how funds are providing IFA.

In ASIC's clarifying note, it also notes that IFA has been subject to confusion, and as a unique type of advice with its own special status. ASIC sees IFA not as a type of advice but rather, as a cross-charging mechanism, which can apply to both general and personal advice.

In our opinion, IFA is both limited-or scoped-advice concerning interests held by members and other beneficiaries in a superannuation fund, as well as a mechanism for cross-charging the entire fund for the cost of that advice.

Personal advice?

ASIC's clarifying note assumes that IFA is personal advice.

Most funds regularly provide general advice in the form of marketing and collectively charge their membership for the cost of providing that advice. This type of general advice is not typically considered IFA.

Undoubtedly, personal advice is the mainstay of IFA. ASIC notes that "... in providing personal advice an adviser must take into account the member's financial objectives, situation and needs."

This is an entirely correct statement. It should be supplemented with the observation that personal advice includes "deemed personal advice;" that is, advice where a reasonable person might expect the provider to have considered "one or more of the person's objectives, financial situation and needs" as set out in section 766B(3)(b) of the Corporations Act 2001 (Corporations Act).

Deemed personal advice?

The issue of deemed personal advice is a central one which emerged from the case of Westpac Securities Administration Ltd v ASIC [2021] HCA 3.

In this case in the High Court appeal, relevant observations of Gordon J include:

• Section 766B(3)(b) poses an objective test based on the circumstances at the time the advice was given, referring to a reasonable person's expectation standing in the shoes of the person receiving the advice.

• The standard of expectation in section 766B(3)(b) is wider than what a reasonable person would merely expect. It is one of reasonable possibility, not reasonable probability.

• The phrase "to have considered" bears its ordinary meaning. This means section 766B(3)(b) captures circumstances where a reasonable person might expect the provider to have taken into account, had regard to, or given attention to, one or more of the person's objectives, financial situation and needs.