ISA says a new report by Roy Morgan Research revealed that between 2011 and 2015, the big four banks doubled their direct superannuation sales advice.
The study also showed that bank customers are being switched from funds with higher net satisfaction and performance into funds with lower satisfaction and performance.
ISA chief executive David Whiteley said these figures show “direct advice is growing quickly and at the expense of traditional channels, including financial advisers”.
“The apparent flow of members from funds with better satisfaction and performance to inferior funds is not what we would expect in a competitive market with informed consumers,” Mr Whiteley said in a statement.
“These findings point to obvious market failure and urgent scrutiny is needed of the direct sales tactics employed by Australia’s banks that sidestep Future of Financial Advice (FOFA) protections.
“General advice direct from a bank does not need to meet the best interest obligations and it is likely the banks are using this and linked sales incentives to funnel customers into underperforming funds.”
Mr Whiteley added that these figures prove there is a need for a “better off” test.
“Such a test would require banks to demonstrate that when they switch a member into a super fund, they will not be worse off compared to their existing super fund. A prohibition on all sales incentives relating to superannuation would also be required,” he said.
“Policymakers have a moral and economic imperative to protect the super savings of millions of Australians from the cross-selling by banks.
“It is absurd that after nearly three decades of compulsory super, direct sales tactics by banks that leave people worse off is still a feature of our national savings system.”
Isnt that the same provisions that Union Super Funds use to roll people’s super into their funds? Just another hypocritical comment from Mr Whitely and the ISA. It’s no surprise that Mr Whitely rarely talks about the insurance aspect of Union Super Funds, and on the few occasions he does it’s to throw fuel onto the RC fire by conflating some of the other things the Banks have done in with an issue that is the making of the Trustees of Union Super Funds. Most of the claims issues highlighted by Adele Ferguson in her ‘groundbreaking expose’ of 4Corners actually related to insurance held within Union Super Funds. While there may have been some delaying tactics from Comminsure, many of the issues related to poor definitions in insurance contracts agreed to by the fund trustees because they didnt want to jack up premiums any further, so they subjected their members to poor quality definitions. There was no grandfathering of existing members in the better policy defs, and there was no option given to members to elect to stay with the better definitions at a higher price. There was just a sneaky underhanded campaign where the only information to members in their communications was that the fund trustees had ‘had a win’ with the insurance companies and premiums wouldn’t be increasing or increasing by only a small percentage. NO MENTION that this had been due to a slashing of the quality of their policy definitions. This is exactly the sort of thing that Adele has crucified Comminsure for with its Trauma def for heart attack, but has she ever called out the Union Super Funds for taking their definitions for TPD back to the 1970’s? NOOOOO. And has Mr Whitely ever owned up to this? NOOOO. Both are too interested in taking a stick to advisers because they know that for one it sells papers and wins awards, and for the other it concentrates market power further in the group he represents.