Treasury presages fundamental change from Shield, First Guardian

Mike Taylor

Managing Editor and Publisher

9 April 2026

ANALYSIS

The financial services sector has now received proof that the machinations which resulted in the collapse of the Shield and First Guardian funds are about to fundamentally change the face of advice, superannuation, platforms and investment management.

The three consultation papers issued by Treasury are the product of the instructions issued by Assistant Treasurer and Minister for Financial Services, Daniel Mulino, last year as he struggled to deal with what the Australian Securities and Investments Commission (ASIC) was describing as “industrial scale” misconduct.

And make no mistake, some of the proposals contained in the three discussion papers covering the sustainability of the Compensation Scheme of Last Resort (CSLR), member protections in superannuation and curbing lead generation activity have existential consequences for some businesses.

Indeed, the consultation paper actually asks whether certain trustee operating models should be restricted, particularly noting ‘trustee for hire’.

It is hard to fault the work put into the consultation papers by Treasury because they reflect feedback from industry stakeholders, but where the CSLR funding mechanisms are concerned they represent an indictment of Treasury’s earlier efforts which resulted in an ill-considered and unaffordable dog’s breakfast.

Treasury’s proposed remedies, including the so-called ‘Waterfall  Framework’, are by no means ideal but they do serve to capture Managed Investment Schemes (MISs) and SMSFs (SMSFs) which have proved so costly to the current CSLR regime.

There are winners and losers in these consultation documents – the winners are inarguably the large Australian Prudential Regulation Authority-regulated superannuation funds. The losers are particular platforms and those using the so-called ‘trustee for hire models’.

Any reading of the consultation documents makes clear that it is Treasury’s assessment that platform-based superannuation is a riskier option that the more traditional superannuation funds, something that prompted the proposal to require such funds to “set and enforce holding limits for investment options”.

The consultation paper also canvasses codified due diligence requirements for platform trustees with respect to onboarding a financial product on to their platform.

The consultation paper noted that “in platform environments, conflicts can be more acute as Platform Trustees operate alongside commercial relationships that may influence which products are admitted to, promoted on, or retained on a platform”.

“Concerns have been raised that certain payments or arrangements, particularly where they are linked (directly or indirectly) to platform access, preferred placement on an investment menu, or volumes of member flows, can reduce a Platform Trustee’s practical independence and create incentives that are misaligned with member outcomes,” it said.

It said the Shield and First Guardian collapses “have raised questions about whether additional regulatory constraints may be warranted where governance models, in effect, separate the trustee from the platform’s product offerings in a way that may undermine effective oversight”.

Stakeholders have until the middle of May to respond to the consultation papers the consequences will be washing through sector for decades.