“The Exposure Draft Explanatory Statement makes no reference to the implications of this reform for financial advisers, who are a key stakeholder,” she said.

“Financial advisers are very much involved in the recommendation of Choice superannuation products.

“There has been no impact analysis undertaken, meaning that there has been no consideration of the impact of this reform on financial advisers and their clients.”

The FAAA made five key recommendations about the test in its submission to treasury including that as a key stakeholder, financial advisers should be involved in the consultation and the rollout of the provisions.

It also recommended the performance test model be amended to take account of the way mastertrust and wrap products typically operate and to provide rollover relief to consumers where a trustee or fund manager closes an investment option and transfers the investors to a different option so the rollover does not trigger capital gains tax (CGT) for the consumer.

The submission also recommended an improvement to the wording of the proposed notice to acknowledge that there may be good reasons to continue to hold an option identified as underperforming, including tax and insurance considerations, and that consumers should speak with their financial adviser before making any changes.

Finally, it stated there should be a requirement for providers to ensure a copy of the notice is given to each member’s adviser at or before the time it is sent to the member.

“The Australian Prudential Regulatory Authority (APRA) performance testing is likely to have a substantial impact on the clients of financial advisers, particularly as it applies to mastertrust or wrap products, and advisers will need to work closely with their clients to manage any issues that arise over the next six months or so,” Ms Abood said.

“While we are not opposed to the introduction of performance testing for Choice products, it is critical that the regime considers the impact on financial advisers and their relationship with their clients. It is also essential that it is fair and does not treat certain products in a way where the performance results are skewed.

“There is a downside risk that needs to be considered, which is that it encourages some clients to make decisions to change products that might not ultimately be in their best interests. We are supportive of a message that encourages clients to consider the performance of their fund, but not one that scares them into making changes without accessing advice.”