On Monday (9 September), the Australian Securities and Investments Commission (ASIC) released its Enforcement and regulatory update (1 January to 30 June 2024), which sets out recent outcomes in enforcement and regulation.
“Superannuation is one of the most important, if not the most important, investment held by most Australians,” the report said.
“As more Australians approach retirement and need to access their hard-earned retirement income, we expect the superannuation and financial advice industries to do everything possible to promote informed and confident investment decision making by members and, in particular, address conduct that inappropriately erodes members’ retirement savings.”
The report continued that in February, it “called out” the risk to retirement outcomes for Australians whose superannuation remains in persistently underperforming investment options.
“We called on trustees, financial advisers, and advice licensees to more consistently focus on the performance of choice superannuation investment options. In May, we released the findings of our review into cold-calling operators, who use high-pressure tactics to encourage inappropriate superannuation switching,” it said.
“Amid evidence of adverse consumer outcomes, we put the superannuation and financial advice sectors on notice to do more to protect members from these unscrupulous actors.”
Already this year, ASIC has examined the performance of choice investment options, including the roles of trustees, financial advisers, and advice licensees, and the product governance practices, including monitoring and decision making about performance issues, disclosures to consumers, and distribution practices.
Specifically, it reviewed the practices of 29 choice investment options and three legacy products offered by a selection of 10 trustees who were asked to identify their worst-performing options based on performance parameters provided.
These options and legacy products covered both the accumulation and retirement phases, and of the 29 options, 24 options did not meet or exceed the performance benchmark disclosed in the product disclosure statements (PDSs) for five or more years.
The review found there was often insufficient emphasis on and a lack of transparency about choice investment options that failed to meet performance expectations and little evidence of trustees communicating to members about investment option performance in a targeted manner. Additionally, financial advisers did not always address underperformance where relevant.
The regulator also issued a public warning after a review identified cold-calling operators using high-pressure sales tactics and online clickbait advertisements to lure consumers into receiving inappropriate superannuation switching advice.
