Consumer advocates accuse financial advisers of diluting consumer protections

The consumer group has issued a statement pointing to the alleged re-emergence of royal commission-like issues in the superannuation sector. Namely, responding to the Australian Securities and Investments Commission’s (ASIC) statement from Thursday morning, Super Consumers Australia said super funds and advisers need to urgently step up their efforts to protect Australians’ retirement savings.

The consumer group said ASIC’s report highlights the failure of “many super funds” to uphold their duty to protect people from being charged for inappropriate, costly advice from their super savings.

ifa has found that although ASIC’s report mentioned instances like “3 out of 7 trustees had cases of fees for no service”, such occurrences were relatively rare even among these three, accounting for only 1 per cent of the 1,526 cases, which suggests approximately 15 cases in total.

Despite this, however, the director of Super Consumers did not hold back, noting in the statement that “it’s appalling that some funds are not closely monitoring fees and deductions from their members’ super”.

“It is a super fund’s job to protect people’s retirement savings from rip-off fees and services, but ASIC found that three of the funds they looked at were failing to even do basic checks of advisor fee deductions. This comes despite regulator warnings to improve on this back in 2021,” Xavier O’Halloran said.

O’Halloran continued by emphasising the need for the government to take more decisive action to halt this behaviour, advocating for the introduction of a ban on unfair trading to effectively end the inappropriate promotion of advice.

“Unfortunately, some funds and advisers are forgetting the lessons of the Financial Services Royal Commission and the horror of ‘fees for no service’. Right now, some within the industry are calling for the removal of obligations on super funds to protect people from inappropriate advice fees. We’re calling on Assistant Treasurer Stephen Jones to protect the savings of Australians from dodgy practices by retaining these protections,” said O’Halloran.

“It is good to see ASIC shining a light on poor practices. We expect ASIC to now follow up with strong enforcement action against trustees and advisers to deter future misconduct.”

The consumer group further suggested that advisers should welcome the reforms currently before Parliament, even adding that “those who are genuinely acting in their clients’ best interests have nothing to fear”.

“Unfortunately, people need to be extra cautious about cold calling and malicious click-bait ads on social media. If you’re approached by a cold caller about your super, just hang up, or if you see click-bait advertisements on social media, just scroll past,” O’Halloran added.

ifa also found that while the ASIC report seems to examine trustee practices regarding the review and approval of advice fees, as well as cold calling and super switching practices, the connection between these topics in the report’s findings is unclear. The analysis of the 10 trustees and the 1,526 advice cases reviewed lacks data on cold calling and super switching. Despite this, the report includes two case studies on cold calling and super switching on page 4.

This raises questions about how these case studies align with the theme of the report and what insights the data provides on cold calling and super switching.