Following the release of ASIC’s review of SMSF establishment advice, the SMC said it is clear additional consumer safeguards are needed to protect Australians’ super savings.
SMC is calling on government, ASIC and APRA to work with organisations across the system to close any gaps that risk consumer safety and confidence and supports ASIC chair Joe Longo’s call for stronger consumer protections such as cooling off periods to give people the chance to “get a second opinion, have second thoughts.”
“We are seeing more and more people risking their retirement savings because they’ve been led to believe their current fund is underperforming and persuaded to seek higher returns somewhere else … this involves sales tactics designed to convince honest and hard-working Australians to transfer their superannuation savings into complex and risky schemes through an SMSF, or more commonly, a platform product,” Longo said.
Misha Schubert, CEO of the SMC, said many Australians are vulnerable to tactics that encourage them to switch their super into options that are more expensive, risky or not in their best interests.
She continued that in addition to backing reforms floated by ASIC, a package of broader ideas could include expanding anti-hawking laws to tackle social media lead-generation, click-through ads and online funnels that replicate pressure-sales environments, including regulating seminar, telemarketing and referral-based tactics that target super switching and SMSF setups under the guise of “education” or “coaching”.
The SMC also called for the government to bring back an ASIC minimum recommended balance for SMSF establishment on the MoneySmart website and use data-driven surveillance to monitor risk in high rates of super switching or SMSF establishment to identify consumer harm risks early and act sooner.
Furthermore, the council suggested ensuring consistently high standards and closing any consumer protection gaps in governance accountability, executive accountability under the FAR regime, regulator supervision, and financial resource requirements across all super and investment platforms.
It also called the reintroduction of ASIC’s 2010 “Investing Between the Flags” initiative and having official alerts when consumers are about to move outside system safeguards, prompting them to confirm they clearly understand the risks.
The SMC added that the First Guardian and Shield collapses have laid bare the scale of serious consumer risks when Australians are urged to switch their super out of the high-performing mainstream super system – where there are strong consumer protections and strong regulatory oversight – into higher-risk places.
“We anticipate others will also have important ideas for reforms to strengthen consumer protections following the Shield and First Guardian collapses – and we welcome the opportunity to work together on them,” Schubert said.
“The collapses of Shield and First Guardian show the current consumer protections are not uniform enough – and we all have a responsibility to work together to ensure they are.”
