The SMC faced significant scrutiny this morning before the Senate.
Perhaps the most notable criticism of the Super Members Council (SMC) at the Senate economics legislation committee on Thursday came from the Association of Superannuation Funds of Australia (ASFA). This is particularly intriguing since they share many of the same members.
While the SMC was adamant that its members support the proposed changes to Section 99FA of the Superannuation Industry (Supervision) Act 1993, ASFA suggested that interpretations of these changes vary among different funds and could change over time.
ASFA CEO Mary Delahunty noted that while the majority of its members support the changes, risk appetites do differ between funds, influenced by historical events and interactions with regulators.
“It doesn’t provide [comfort] to all of the members because they all have different risk tolerances. And it’s worthwhile for the committee to note that over time, these risk tolerances may change.
“A lot of the funds have a risk appetite that has been informed by historical events and informed by interactions and colleagues’ interactions with regulators over time and so it is something that the sector should be happy that we see these differences in risk approaches emerging in different funds because it is a sign of a mature sector that doesn’t suffer from group think, but can come to different levels of comfort based on their different risk appetites.”
Delahunty’s implied suggestion was that while some funds may be comfortable enough to continue their current practices, which include risk-based sampling, others may interpret the law as requiring more thorough checks.
On the other hand, SMC’s CEO, Misha Schubert, insisted that it is incorrect to claim the bill requires funds to review every single statement of advice (SOA).
“One claim that’s been made is that the bill would require super fund trustees to check every single statement of advice ... This claim is not correct. The bill clarifies the trustees can continue to adopt a risk-based compliance approach, including using techniques such as spot auditing,” Schubert said.
However, the SMC faced the most scrutiny regarding its recent media release, which called for tightening anti-hawking laws to “stop dodgy financial advisers” from using cold-calling businesses to solicit clients.
In the statement, it argued that “rip-off merchants” exploit a hole in anti-hawking legislation – which bans the unsolicited selling of financial products – to secure “exorbitant advice fees” from unsuspecting consumers, often charged from their super account.
The SMC referenced the Australian Securities and Investments Commission’s (ASIC) recent report to support its argument, noting that the “shonks” mentioned in the report, who persuade clients into inappropriate super switching through cold calling and high-pressure sales tactics, could be eliminated if super funds are required to monitor and scrutinise SOAs.
“One of the ways these shonks can be caught is by super funds checking if advice fees are appropriate,” said Schubert.
Schubert defended this view in Senate on Thursday.
Delahunty, however, said she deems the use of the terms “dodgy advisers” inappropriate.
“I don’t think it’s correct to use the term adviser in the categorisation,” the ASFA CEO said.
“Certainly parties at the moment they 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 the Financial Advice Association Australia (FAAA) with CEO Sarah Abood telling 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, ASIC’s report has already been mentioned this morning. What has not been mentioned is that that report found that less than 1 per cent of the cases it reviewed showed any evidence of fee for no service and less than 0.07 per cent of those cases showed evidence of excessively high fees, according to ASIC’s definition.”
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