Older Australians, high-earners switching to super platforms
The Financial Services Council (FSC) has moved to debunk recent assertions made by the Super Members Council (SMC) over a “spike” in the number of Australians switching their superannuation from a default fund to a “riskier” platform, with new research confirming the most likely cohorts to do so are older Australians with higher balances and younger high-income earners.
Conducting a survey of the seven-largest platform providers by funds under administration (FUA) and market share, the FSC found newly established platform accounts had an average balance of $349,500 and an average age of 59.
Of the investors under the age of 30 who have made the switch, new accounts have an average balance of $54,800 – more than three times higher than the $16,200 average balance held in Australian Prudential Regulation Authority (APRA)-regulated accounts. A similar trend emerged for those aged between 30 and 45, with new platform accounts averaging a balance of $162,300 – more than twice the $80,800 average across APRA-regulated funds for that age cohort.
“Superannuation platforms provide Australians with greater control over their retirement savings and are often used by people with more complex financial circumstances who have received personal advice on tailored investment solutions,” CEO of the Financial Services Council, Blake Briggs, said.
“New FSC analysis of data provided by the platforms sector makes it clear that Australians switching to superannuation platforms are generally older consumers with higher balances.
“Even amongst younger Australians switching to superannuation platforms, they have higher balances than their peer cohorts, reflecting their more complex financial needs.”
According to the data collected by the FSC, 24.7 per cent of new accumulation accounts on platforms receive multiple rollovers, which suggests members are using platforms to consolidate several super accounts.
A statement from the council noted that super platforms are “subject to the same legislative and prudential framework as other superannuation products” under APRA’s remit, and customers engage with financial advisers to gain access to platforms as a “safeguard” given their “additional legislative and fiduciary obligations”.
The FSC said it was “concerned that misleading data risks distorting the superannuation policy debate following the failures of Shield and First Guardian. It is simply not correct to infer that a superannuation consumer who has switched out of a default fund on the recommendation of a financial adviser has necessarily been subject to predatory lead generation or poor advice, and the default funds making that claim do not hold the necessary data to substantiate those arguments”.
“The methodology used by SMC to criticise the choice sector is flawed and should not be allowed to distort the public policy debate,” Briggs said.
“Default funds cannot see a member’s full financial position – including whether multiple accounts are being consolidated over time or whether an adviser is using a platform to manage the household wealth of several family members under a holistic strategy.
“The superannuation industry needs to have a mature conversation around the consumer protection framework in light of the failures of Shield and First Guardian, but this debate should not be co-opted by the commercial interests of default superannuation funds.
“Misleading data does not help policymakers, regulators, or consumers engage with the complex issues surrounding advice, switching behaviour and retirement outcomes.
“Inferring that financial advisers’ use of superannuation platforms is inherently risky is insulting to professional financial advisers, ignores the benefits that financial advice offers Australian consumers, and is not supported by evidence.”
The SMC told Financial Newswire there still remained a “cause for concern”.
“Healthy competition and choice are important long-term features of Australia’s super system, but alarm bells should be ringing when data shows a clear skew towards younger people and people with lower balances starting to be switched into more complex, higher cost products,” SMC chief executive, Misha Schubert, said.
“This doesn’t mean that more typical switching of pre-retirees to platforms and SMSFs isn’t also occurring – two things can be happening at the same time – but the cause for concern is a spike in potentially riskier switching among lower balance and younger members, which it appears could be influenced by social media ads and lead generation.
“Everyone across the super sector should be deeply concerned about the lead-generated switching advice that supercharged the Shield and First Guardian scandals that ASIC has repeatedly warned about – if warnings are ignored, it’s a greenlight to the next collapses.”
Filthy SMC.
Well done FSC in calling this out.