The Super Members Council has welcomed the Government's announcement of an integrated package of consumer protection reforms to stop disasters like the Shield and First Guardian collapses, which cost 12,000 Australians more than $1.2 billion in retirement savings.
SMC said this package was “one of the most important consumer safety reforms in a decade, closing safety gaps and raising standards and accountability on those who manage Australians’ super.”
"A world-class system requires world-class safeguards for consumers. These reforms will go a long way to making all Australians' super safer. We look forward to working with Government and Parliament to make them as strong as possible," said SMC CEO Misha Schubert.
“The Government should be commended on its extensive consultation process following the high-profile collapses, in which lead-generation businesses used clickbait ads and cold calls to lure Australians out of safe, high-performing mainstream super funds and switched them into high-risk structures.”
SMC welcomed today's commitments to:
- Tighten controls on lead generation practices that previously channelled consumers into risky super and investment products.
- Push ahead with the long-promised Delivering Better Financial Outcomes reforms to expand access to safe, affordable financial advice.
- Strengthen scrutiny and oversight of advice fees deducted from Australians' super accounts.
- Strengthen obligations on super ‘platform’ funds.
On the overall package of reform, SMC CEO Misha Schubert said, “Every responsible leader right across the Parliament and the super and advice systems has a duty to the Shield and First Guardian victims to fix the safety gaps," she said.
"Those disasters can't be dismissed as the misconduct of a few bad actors. They exposed weaknesses in the safeguards framework that made the misconduct possible and lost people's life savings."
“However, the proposed changes to the Compensation Scheme of Last Resort fall short by unfairly shifting the costs of financial misconduct onto millions of everyday Australians with their retirement savings in safe, mainstream super funds who were not involved in the collapses.”
Lead generation
SMC said stopping harmful lead generation in super was one of the most crucial reforms.
While a total ban on lead generation would be the best approach, licensing lead generators and holding advice licensees to account for the conduct of lead generators is a step forward. Two of the lead generators involved in the Shield and first Guardian cases were licensed.
"Stronger controls are clearly needed when you look at how people exploited loopholes in the anti-hawking laws." Ms Schubert said.
"We need to end clickbait advertising, engineered sales funnels that harvest people's contact details, and call centres that lure Australians into high-risk arrangements."
Delivering Better Financial Outcomes
SMC said it was pleasing to see the Government acknowledge that the long-promised financial advice reforms are an essential part of the consumer safety package.
“Super members ask every day, 'Do I have enough to retire on?' It's a simple question that they expect their fund to be able to answer. The challenge is making that available at scale.
“This announcement gives Australians access to simple, trusted intra-fund advice in retirement, delivered by their own super fund, to help them make better decisions and reduce the likelihood they are driven into the hands of risky schemes and questionable actors."
"A New Class of Adviser also has a role to play in expanding Australians’ access to advice via their own super fund, helping millions more people get the guidance they need, when they need it."
Best Interest Duty
The Best Interest Duty is a critical member safeguard and can coexist with scaled advice. This crucial consumer protection should not be weakened or watered down.
Weakening the Best Interest Duty would expose members to exactly the kinds of harm these reforms are meant to prevent. It's a consumer safeguard worth protecting.
Advice fees
SMC also welcomed stronger oversights of advice fee deductions from super accounts.
"Financial advice can help Australians build better retirements. But when advice fees are deducted directly from retirement savings, there must be strong and consistent controls to ensure those fees are always fair and reasonable, that people's super isn't eroded by large fees, and that the advice is always in the member’s best interests.”
"These reforms will empower regulators and lift obligations on trustees to ensure advice fees are value for money and restore confidence that retirement savings are being protected."
Platform accountability
SMC said stronger obligations for super 'platform' products to hold them to the same high standards as mainstream super funds would help close long-standing inconsistencies in consumer protections.
"Australians deserve the same safety, accountability, and governance standards across the entire super system, wherever their super is invested."
“We welcome new APRA powers to set sufficient capital requirements for some platform trustees, coupled with new ASIC powers to direct trustees to compensate members in a collapse."
About us:
The opinions above are those of the author in their capacity as spokesperson for Super Members Council of Australia (SMC). SMC, the authors and all other persons involved in the preparation of this information are thereby not giving legal, financial or professional advice for individual persons or organisations.
Contact details:
Matt Read, 0432 130 338, [email protected]
