‘Broad brush slur’: Broader profession unites against SMC

On Wednesday, the Super Members Council (SMC), which represents many of Australia’s largest superannuation funds, released a statement calling for not just the immediate passage of the first Delivering Better Financial Outcomes (DBFO) bill, but also more stringent anti-hawking laws to “stop dodgy financial advisers” from using cold-calling businesses to solicit clients.

The use of such inflammatory language just a day before the DBFO bill was the subject of a Senate hearing prompted significant reaction from both those attending the hearing and the broader financial advice community.

In the Senate, SMC CEO Mischa Schubert was very bullish about urgently passing the DBFO bill and even recommended it take effect three months after royal assent instead of the currently planned 12 months.

WT Financial managing director Keith Cullen, who attended the hearing on Thursday as the representative of the Joint Licensee Group, told ifa the SMC is a group “evidently out to undermine the advice profession” and force super funds into a “bureaucratic nightmare”.

Cullen questioned why if the Australian Securities and Investments Commission (ASIC) insists that the bill does not require every statement of advice (SOA) to be checked and Treasury maintains it’s business as usual, they don’t simply revise the draft to reflect this representation.

“The fact remains – if ASIC says they don’t expect every advice document to be reviewed, if APRA agrees, if the minister insists, if he amended the EM to say so, if ASFA says they have members who are very concerned (about the new obligations), if the Law Council says the EM won’t count and our concerns are spot on – then why not clarify the drafting” Cullen told ifa.

“What and who is driving this bloody-minded approach that we all know will drive up advice costs and restrict access to advice at a time when funds as are set to use backpackers (sorry, I should say ‘qualified advisers’) to give conflicted advice at the expense of all their members – not just the ones who seek their backpacker advice – through ‘collective charging of fees’.”

He argued that given AFSLs already operate under stringent licensing obligations designed to ensure the legitimacy of advice fee deductions from super, “with significant legal and financial liability”, there is no need to introduce stricter measures.

“Trustees, who have their own set of serious obligations, know their responsibilities well. They currently have legal agreements with AFSLs to maintain conduct oversight and due diligence,” Cullen said.

“Trustees have complete control over which AFSLs and advisers they engage with, and they dictate the rules of these interactions. The existing structures are robust and provide ample consumer protections.”

Cullen, like many others taking part in the Senate hearing, insisted that the proposed changes to section 99FA add nothing but confusion, uncertainty, and cost increases for consumers.

“If trustees are compelled to scrutinise every single advice document, the additional cost burden – estimated at about $400 per member request – will siphon away hundreds of millions of dollars from consumers’ retirement savings annually.”

Not only would the measures fail to make advice more affordable, he said it’s a “deliberate sabotage of consumers’ financial security”.

“Trustees may find these new obligations so burdensome that they could withdraw their support for facilitating advice fees altogether, making advice even less accessible,” Cullen warned.

“That might suit some who have repeatedly called for an outright prohibition on members using their own money to pay for professional advice and it might play into the hands of those who want to undermine the profession like the Super ‘Members’ Council and ensure members only get conflicted backpacker advice but it does nothing for members at large.

“This is ideological self-interest being given preference to customer outcomes at a time when Australians are already struggling with cost-of-living pressures.

“On today’s evidence we are confident sanity will prevail and this bill will be amended to ensure it meets its stated intent.”

FAAA demands apology from SMC

Financial Advice Association Australia (FAAA) chair David Sharpe expressed his disappointment with the SMC via LinkedIn.

“In a recent media release the SMC made reference to financial advisers as ‘rip off merchants’ and ‘dodgy’,” Sharpe wrote.

“It may be this language was meant to apply only to the tiny minority of advisers who do the wrong thing – if so, it wasn’t made clear. I’ll extend the courtesy that this was clumsy rather than deliberate. Regardless, such inflammatory and inaccurate language does nothing to help consumers or anyone else.

“Let’s be clear – the absolute vast majority of financial advice professionals work hard as the financial guardians to protect and grow the financial wellbeing of their clients.”

Sharpe acknowledged that while there may be some within the profession that do the wrong thing, the profession pays a hefty sum to ASIC to hold this small subset to account.

“Our members also actively report misconduct that they encounter, to ASIC directly as well as through us, and become very frustrated if ASIC does not act on their reports,” he added.

“To use a broad brush slur is offensive; It would be akin to slurring all super funds for the misdeeds of a few. I don’t suggest that all superfunds are involved in greenwashing, for example, because some have been prosecuted by ASIC for this conduct.

“I would welcome an apology from the SMC, and an acknowledgment of the many thousands of professional financial advisers in this country who are doing a great job ensuring the financial wellbeing of their clients every day.”

Defence of advisers in the Senate

Financial advisers found an unexpected ally in Mary Delahunty, CEO of the Association of Superannuation Funds of Australia (ASFA), who deemed the use of the term “dodgy advisers” inappropriate before the Senate on Thursday.

“I don’t think it’s correct to use the term adviser in the categorisation,” the ASFA CEO said.

“Certainly parties at the moment have managed to insert themselves into the conversation with members and we will prefer that that be done with the funds and with licensed financial advisers.

“I don’t think it’s correct to use the term adviser in that particular, you know, categorisation ... I wouldn’t say you can categorise them [licensed advisers] as doing cold calling.”

Delahunty’s interpretation was also supported by FAAA CEO Sarah Abood, who told the Senate, the language is “inappropriate” and “unfortunate”.

“There’s been some press recently, high-pressure sales tactics being used to induce consumers to switch super funds. Such tactics and, of course, financial advice that is not in the best interests of consumers are unacceptable. And trustees can most certainly play a role in identifying them, and putting an end to such behaviour,” Abood said.

“The current risk-based approach ensures that trustees can continue to play this role. I would add that such activities represent a tiny proportion of the financial advice relationships in this country.”

Financial Services Council (FSC) CEO Blake Briggs added his voice to the criticism of the SMC’s statement, saying that he hoped everyone could be “adults”.

“I think it’s unhelpful that this has become as political an issue as it has and some of the language around dodgy advisers that we’ve seen from the industry super side of things probably hasn’t contributed to a sensible policy debate,” Briggs said.