Industry funds point finger at platforms-based super

The industry funds focused Super Members Council (SMC) has drawn a clear line between MySuper and choice superannuation products in a master trust arrangements and those sitting on investment platforms.

In doing so, the SMC has made clear that its members have no interest in being roped into a broader funding base for the Compensation Scheme of Last Resort (CSLR).

The SMC has told the Treasury consultation on the CSLR exceeding it sub-sector cap, that recent failures such as First Guardian and Shield “underscore that the risks to members’ superannuation are concentrated around platforms, managed investment schemes and advice – and not default funds, MySuper and choice products”.

“These collapses are not isolated incidents. They starkly expose the urgent need for platform and MIS reform to elevate consumer protections or significant calls on the CSLR will continue to occur,” SMC said.

“However, expanding the CSLR to superannuation trustees would deviate from the scheme’s original policy intent. Any reform must balance consumer protection with system stability and the obligation to act in members’ best financial interests—particularly in sectors where such losses do not occur.”

“Additional calls on personal advisers to make up shortfalls triggered by collapses elsewhere in the sector also raise questions about the long-term sustainability of financial advice services and whether such costs align with members’ best financial interests,” the SMC said.

“Many super funds operate advice businesses as fully-owned subsidiaries, while others have commercial arrangements with external firms under an authorised representative licencing model. Drawing additional levies from the sector creates tension with the Government’s proposed financial advice reforms that are intended to make advice more affordable and accessible for fund members.”

“It is also worth noting that personal advice provided by super funds is mostly on an intrafund basis – limited to topics explicitly relating to their interest in the fund – and does not involve recommendations to switch into high risk externally managed products,” the submission said.

The SMC suggested that the Government could tap unclaimed superannuation that has reached its statutory limit to help fund the funding shortfall.