ASIC reinforces adviser responsibility for super choices
The Australian Securities and Investments Commission has again linked financial advisers and licensees into the responsibility framework for under-performing choice superannuation funds.
The regulator has used its latest enforcement and regulatory update covering the first six months of 2024 to drive home the message that advisers and licensees are in scope with respect to superannuation fund performance and selection.
The tone was set by ASIC chair, Joe Longo who said “we expect the superannuation and financial advice industries to do everything possible to promote informed and confident investment decision-making by members”.
“In February, we called out the risk to retirement outcomes for Australians whose superannuation remains in persistently underperforming investment options. We called on trustees, financial advisers, and advice licensees to more consistently focus on the performance of choice superannuation investment options.
“In May, we released the findings of our review into cold calling operators, who use high-pressure tactics to encourage inappropriate superannuation switching,” Longo said. “Amid evidence of adverse consumer outcomes, we put the superannuation and financial advice sectors on notice to do more to protect members from these unscrupulous actors.”
The ASIC report further focused in on the issue in a case study in which it said it had examined the role of trustees, financial advisers and licensees together with product governance practices, including monitoring and decision making about performance issues, disclosures to consumers and distribution practices.
“Specifically, we reviewed these entities’ practices in relation to 29 choice investment options and 3 legacy products (products closed to new members) offered by a selection of 10 trustees.
“Trustees were asked to identify their worst performing options based on performance parameters we provided. These options and legacy products covered both the accumulation and retirement phases. Of the 29 options, 24 options did not meet or exceed the performance benchmark disclosed in the Product Disclosure Statements (PDSs) for five or more years.”
“We also reviewed 88 advice files across 26 advice licensees, focusing on advice provided about 9 investment options that all persistently failed to meet performance expectations,” the case study said.
“The review focused on advice related to underperforming options, not overall compliance with the best interests duty and related obligations. Ultimately, we found there was often insufficient emphasis on and a lack of transparency about choice investment options that failed to meet performance expectations.
“There was little evidence of trustees communicating to members about investment option performance in a targeted manner, and financial advisers were not always addressing underperformance where relevant,” the case study said.
Are we comparing the Australian Super Balanced Option with 76% assets in Growth Asset, that got a low single digit return and barely passed APRA’s performance test, where even the Fixed Interest portion is invested in junk bonds that have recently gone belly up, not to mention the Ethical option that invests in major Ammunition companies exposed by an ABC journalist.
I suspect we’re are now comparing that to the nasty old MLC Balanced option that likely has 50% in growth assets and invests in AAA rated bonds. The old formula of attack the Banks to appear as though we’re actually doing work.