Industry funds urge action on SMSF/platform switching

Mike Taylor

Managing Editor and Publisher

30 June 2026

Just days before the Australian Securities and Investments Commission (ASIC) released REP 833 highly critical of platform superannuation trustees, the big industry funds filed a supplementary submission to Treasury warning on member switching to platform and self-managed funds.

The Super Members Council (SMC) went to the trouble of filing a supplementary submission to Treasury’s consultation on Enhancing Member Protections in the Superannuation System arguing that increasing member leakage to platform super and SMSFs has revealed clear and growing consumer protection risks.

It is arguing that the switching is too much owed to young, low-balance members and points to the need for the Government to urgently implement the reforms which are part of the Delivering Better Financial Outcomes (DBFO) legislation.

The supplementary submission argues “an urgent imperative for the system regulators to prioritise surveillance of platform-level fund flows and advice expense patterns as leading indicators of emerging consumer harm risks”.

Referring to its analysis, the SMC stated:

“First, switching to both platform-based super funds and SMSFs is increasingly shifting to younger members and members with lower balances. Across both channels, a substantial majority of newer switchers have super balances below $100,000 or $200,000, and this recent switching growth is strongest in younger age cohorts. These patterns are not consistent with a commonly asserted view that such switching is primarily driven by wealth, retirement complexity, or more sophisticated member needs.

“Second, the more recent platform switching data points to clear and growing consumer protection risks associated with widely variable advice fee deduction settings — including higher fee-cap arrangements — and rapid advice expense growth concentrated in a small number of platform funds.

It said that while its modelling finds advice fee settings (that is the magnitude of allowable fee deductions) remain associated with stronger inflows into platform products even after accounting for fund size, costs, performance and advice incidence, consistent with the incentive risks identified by ASIC in REP 781. This supports the case for much stronger and more consistent trustee oversights, clearer reporting, and structural consumer protections.

“Third, the SMSF data highlights a clear regulatory asymmetry which results in Australians with low and modest super balances facing significant risks of both investment underperformance and outsized expense costs which can materially erode their super and retirement outlook.

“Recent data shows thousands of Australians are now increasingly switching into SMSFs at balance levels far below those traditionally associated with the higher costs associated with SMSF establishment and operation, exposing these members to materially higher costs and weaker long-term returns without equivalent consumer safeguards yet with no official warning at the point of SMSF establishment or rollover. “This creates a major consumer protection gap that supports the case for mandatory regulator-issued warnings, clear minimum balance requirements for SMSFs, and more consistent consumer protections across the super system,” it said.