In a statement yesterday, ISA said a new report by Roy Morgan Research shows that the Big Four banks have doubled their direct superannuation sales advice between 2011 and 2015.
It also shows 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 that “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,” he said.
“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.
“Policy makers 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 leaves people worse off is still a feature of our national savings system.”
There is currently a large Industry Super Fund advertising heavily on television for people to put all of their future employer funds into the same fund (which happens to be theirs). This would constitute advice in my opinion, and disregards any future better insurance or super options they may come across. Is that ethical or in the client’s best interests?
While Mr Whitely always says some strange things, this has to be one of the most bizarre and hypocritical.
I’m not sure that any ISA fund would pass a “better off” test when insurance is considered.
POT KETTLE!
Yet the ISA continually supports Industry Funds who place the monies of members into investments that have ties with the relevant union that underpins the type of industry fund. Furthermore, we find inherent conflicts of interest whereby union directors are also directors of the companies that the industry fund invests in (which in turn hire the unions for the projects being worked on). The directors then get directors fees which gives them a couple bites of the cherry. This is how industry funds are a finely veiled mechanism to increase the power base of unionism within society (which could be okay provided they don’t have a profit making incentive). This and the connection with the Labor party is the reason that industry funds are only allowed on the default awards. To summarise the above, it is not appropriate for the ISA to comment on the ethical nature of the retail super sector from a “holier than thou” pedastool when they in turn are just as corrupt. UNLESS YOU ARE AN UNALIGNED ADVISER OR PRODUCT PROVIDER STAND DOWN.
Where ISA keeps going wrong is thinking all people are the same and want the same things. Comparing default investment option performance and average satisfaction level does not align with individual customer goals. I don’t work for a bank, but am sure in the current anti-advice media environment they would be doing some sort of comparison to show why the new fund is better aligned to client goals. These findings don’t point to anything, ISA is just making another generalist controversial remark with no evidence. Yawn.