On the back of concerns that the first Delivering Better Financial Outcomes bill will require stricter checking from super fund trustees with regard to statements of advice, ASIC believes the deduction of advice fees has led to instances of “inappropriate erosion of members’ balances”.
In a report released on Thursday morning, REP 781 Review of superannuation trustee practices: Protecting members from harmful advice charges, the corporate regulator has called on superannuation trustees to “renew efforts to protect members from unscrupulous operators amid evidence of inadequate oversight of advice fee deductions”.
The corporate regulator said the findings of the review that are included in the report showed that, despite the financial services royal commission highlighting the deficiencies in trustee oversight, they “continue to pose risks and cause detriment to members”.
“ASIC recognises the importance of access to quality financial advice about superannuation, and acknowledges it is common for advice fees to be deducted from superannuation accounts,” the regulator said.
“However, trustee vigilance can mitigate risks to members from unscrupulous operators, including cold calling businesses using high-pressure sales tactics leading to inappropriate superannuation switching advice.”
The review looked at a sample of 10 superannuation trustees representing around 8 million members, managing a combined $923 billion in assets.
Over a 12-month period, ASIC found that:
“Super trustees are responsible for members’ money held within the fund. Effective trustee oversight practices can help mitigate risks and protect superannuation members from real financial harm over the long term,” ASIC commissioner Simone Constant said.
“Despite repeated calls for an uplift in practices from ASIC and APRA in joint letters issued in 2019 and 2021, our latest review shows continued deficiencies in trustee oversight of advice fee deductions by some trustees.”
She said that ASIC is particularly concerned about advice that is stemming from high-pressure sales tactics.
“ASIC is concerned about the potential impact on superannuation members, particularly amid evidence of balance erosion from fee deductions for advice originated by cold calling business models using questionable sales tactics that pressure members into switching superannuation funds,” Constant said.
“Superannuation trustees should have processes in place to detect and respond to suspicious activity.”
ASIC has urged super trustees to “reassess their oversight processes”, pointing specifically to:
“Superannuation trustees can uphold member trust in their oversight by ensuring super balances are protected from unscrupulous operators,” Constant said.
“Along with our peer regulator, APRA, we urge trustees to review and strengthen their practices to help members achieve their retirement ambitions.
“As the conduct regulator for the superannuation industry, ASIC will consider acting against trustees found to have breached their obligations to members.”
ASIC said it would publish an information sheet in the coming weeks that would set out how financial services laws apply to cold calling operators, financial advisers, and financial advice licensees.
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