The Super Members Council (SMC) has called for stronger protections to prevent consumer harm in high-risk super switching, saying that the First Guardian and Shield collapses have shone a light on the kinds of practices that need to be avoided.
Speaking at the National Press Club earlier this month, ASIC chair Joe Longo reiterated the regulator’s stance that there needs to be more “friction” in the process of members switching their super.
“The superannuation-switching catastrophe that’s been unfolding with First Guardian and Master Shield and related funds, it all started with ordinary Australians, in many cases, moving, in my words, their super from a relatively safe, conventional environment into a high-risk environment,” the chair said.
“And there’s plenty of blame to go around for what went wrong there. And one of the things we’re suggesting is that we need to slow people down a bit.
“And that essentially means, if you go and buy a house or a car or a major financial investment, I mean, most of us put some time into that. We don’t do it on the same day. And unfortunately, because of the industrialisation of the approach to this misconduct, a lot of Australians were talked into moving their super on the same day or the next day. It’s pretty bad.”
In a statement, the SMC said it was clear that there needs to be “additional consumer safeguards” to protect super savings.
“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,” the SMC said.
Among the measures that the SMC proposed is an expansion of anti-hawking laws to tackle social media lead-generation, click-through ads and online funnels that replicate pressure-sales environments. This includes regulating “seminar, telemarketing and referral-based tactics that target super switching and SMSF setups under the guise of ‘education’ or ‘coaching’”.
It has also pushed for a joint ASIC-APRA-Treasury review to ensure that any consumer protection gaps in governance accountability, executive accountability under the FAR regime, regulator supervision, and financial resource requirements are closed, adding that it should reassess the trustee-for-hire model.
Other measures include:
- Reintroduce 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.
- Bring back an ASIC minimum recommended balance for SMSF establishment, on the MoneySmart website.
- Task ASIC to comprehensively review its conflicted remuneration guidance in light of practices highlighted by these two collapses.
- 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.
SMC chief executive Misha Schubert said: “The social licence of the whole system relies on strong trust in super and strong trust in good advice – and Australians rightly expect there to be strong uniform consumer protections across the entire system.
“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.
“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. We need a system that universally prevents consumer harm.”
Those in glass houses probably shouldn’t throw rocks.
The SMC should be quiet.