According to the SMC, a “compelling” four in five Australians want to see the government take strong action against predatory social media advertisements pushing users to switch their super to risker products.
An online survey of 1,000 Australian conducted by Ideally on behalf of the council found that 45 per cent of those surveyed answered that they had been recently exposed to ads they labelled as click bait, enticing them to change funds.
“Disturbingly, almost two in three survey respondents – or 63 per cent – were not aware that these types of ads were used to switch Australians out of their super funds into the collapsed Shield and First Guardian funds that led to 12,000 people losing $1.2 billion of their super savings,” the SMC said.
The SMC believes that the failures of the Shield and First Guardian were exacerbated by gaps within consumer protection laws that allowed for these super-switching ads to run.
“Those events show how aggressive lead generation practices, high pressure sales tactics and gaps in oversight can be used to funnel Australians out of safe, high-performing, low-cost, regulated super funds and into unsuitable or unsafe super products, losing their life savings and undermining public trust in super,” the council said.
Meanwhile, 70 per cent of respondents said they wouldn’t be able to tell the difference between a scam and actual legitimate advertisement.
SMC chief executive said, “These new insights show everyday Australians strongly want to see the Government take action to make super safer for everyone. They want them to truly raise the bar on minimum safety standards.”
“This also highlights why the Government shouldn’t weaken or water down crucial safety reforms. Australians clearly get it: they know that complexity and weak accountability create grave dangers to people’s life savings and make further Shield and First Guardian-style collapses possible.”
The council reaffirmed its support of the Delivering Better Financial Outcomes (DBFO) reforms promised by the government in the wake of the debacle, calling the reforms “a key consumer safety protection”, arguing it will help increase access to advice and “taking people out of the hands of lead generators on social media.”
“This also highlights why the Government shouldn’t weaken or water down crucial safety reforms. Australians clearly get it: they know that complexity and weak accountability create grave dangers to people’s life savings and make further Shield and First Guardian-style collapses possible,” Schuber said.
However, Schuber and the SMC’s view about the need for strong reform is not shared by other key members of industry organisations, such as the FAAA’s general manager of policy, advocacy and standards Phil Anderson.
On a recent episode of the ifa Show Podcast, Anderson said the lessons that should be learnt from the Shield and First Guardian collapse is not that the rules weren’t adequate enough, but that a number of professionals felt they could break them, suggesting more regulation would only complicate an already overly-cumbersome process.
“One of the important factors here is that it’s complicating the process. You’ve already got a fairly lengthy process, and adding additional steps increases the risk that something goes wrong or that clients are disadvantaged.
“There’s a potential risk that clients will be out of the market for longer, and that can lead to worse outcomes depending on market movements. So, there are real downsides to adding these kinds of barriers.”
Financial Professionals Australia (IFPA) president Scott Heathwood echoed Anderson’s sentiment.
“What happened in those cases was not a failure of advertising or client acquisition. It was an integrated scam – a closed loop where lead generation, advice, product manufacturing and capital flows were all aligned to serve one outcome: moving client money into a predetermined destination.”
Beyond this, the SMC also reiterated its calls for stronger consumer protections, including:
- Removing any conflicts of interest wherever they arise in the chain.
- Strengthening trustee and adviser oversight on super switching.
- Stronger super platform and product accountability.
- True like-for-like comparisons at the point of switching including all returns, advice fees and costs.
- A crackdown on aggressive selling tactics through social media ads and cold calls.
I am all in favour of banning predatory, misleading, and deceptive super ads. These terrible ads featuring smug people giving weirdo hand signals have been on our TV screens constantly for at least 20 years, and it’s about time action was taken. So many consumers have ended up in inappropriate products and lost valuable insurances because of them.