In a note released on Thursday, APRA and ASIC summarised discussions from their August roundtable with executives, which revealed that the two controversial funds “featured prominently”.
“In opening, APRA raised concerns regarding the Shield Master Fund and First Guardian Master Fund matters, noting that the result of these products being available through some superannuation platforms could weaken confidence in the superannuation system,” the regulators said in a joint statement.
APRA told trustees they “must work collaboratively as far as possible” and act “appropriately” when considering how to improve practices to prevent future harm to members.
It added: “APRA reminded trustees that the involvement of financial advisers in recommending platform choice products to members does not absolve trustees from their obligations under s52 of the SIS Act and from compliance with APRA’s prudential requirements.”
Funds present included Netwealth and Equity Trustees – both of which had hosted First Guardian on their platforms. Equity Trustees has since become the first trustee to face ASIC legal action.
The session also canvassed how trustees could share intelligence on high-risk structures and adviser behaviour and sharpen oversight of advice fees deducted from member accounts.
“ASIC challenged participants to consider what recent actions they had undertaken to improve monitoring of advice fee deductions, and whether there are other products on platform menus that may lead to poor outcomes for members,” the statement said.
Other areas of focus included strengthening trustee oversight through structured assessments and data triangulation, tougher due diligence on managed investment scheme boards and expanded adviser monitoring frameworks.
“Some CEOs described using dashboards, analytics and geographic mapping to identify anomalies such as mismatched adviser-member locations and disproportionate revenue growth,” the regulators said. “Monitoring triggers now include referral patterns, account openings and unusual behaviours relating to flows at the investment option level, with some platforms conducting file reviews. Participants also committed to supporting members who, for various reasons, may no longer have a financial adviser.”
The discussions come as Treasury consults on mechanisms to fund consumer losses arising from the collapse of funds like Shield and First Guardian.
Advisers should have been able to rely on Macquarie and Equity Trustees doing their job under s52 — they approved Shield and First Guardian onto their menus, not us. Now ASIC is taking action against trustees and pushing for compensation while advisers are left carrying the can. Trustees can’t collect fees on the way up and dodge responsibility when it all unravels.
That’s an interesting way of looking at it. Personally, I would go to a Financial Adviser for advice, not to a platform or trustee for advice. So out of all the available investment products on a platform or approved by a trustee, the Adviser should recommend one to me which is sound. The trustee and platform has a roll to play but it is secondary to the Adviser in my opinion.
Advisers give personalised recommendations, but let’s be realistic—comparing the due diligence capacity of a salaried adviser to that of SQM Research, Macquarie, and Equity Trustees is ridiculous.
The Shield Master Fund was rated Favourable by SQM Research, then added to Macquarie and Equity Trustees’ super menus after they completed their statutory due diligence under s52 of the SIS Act and SPS 530. All of that took place before a single adviser recommended it.
Those stamps of legitimacy are exactly what gave advisers the confidence that they were placing clients into a suitable product. If the fund later proved flawed, that’s a failure of the gatekeepers, not the advisers who reasonably relied on them.
Saying that the individual recommending these products are not to blame is absurd.
That’s a nice headline, but it ignores how the system’s built. Advisers don’t manufacture or approve products — that’s on the platform trustees and research houses. Macquarie and Equity Trustees signed off on Shield, not individual advisers. If APRA says trustees can’t outsource accountability, why keep pointing the finger at advisers?