SMC suggests consumer switching protections amid Shield scandal

The Super Members Council (SMC) is calling on the government and regulators to impose additional safeguards to prevent consumer harm from superannuation switching.

The call from the industry organisation echoes concerns raised by ASIC chair Joe Longo in light of the Shield and First Guardian collapses which have been described as a ‘catastrophe’.  

This saw thousands of investors encouraged to switch their superannuation into high-risk investment offerings which came with high fees and the schemes later collapsed. Much of this switching was encouraged by cold calling and social media campaigns.

In September, super fund trustee Macquarie agreed to remediate all affected members the entirety of what they had invested in Shield to the tune of $321 million and ASIC has encouraged trustee Equity Trustees to make the same move.

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SMC chief executive, Misha Schubert, said: “The social licence of the whole system relies on strong trust in super and strong trust in good advice – and Australians rightly expect there to be strong uniform consumer protections across the entire system.

“The collapses of Shield and First Guardian show the current consumer protections are not uniform enough – and we all have a responsibility to work together to ensure they are.

“Many Australians are vulnerable to tactics that encourage them to switch their super into options that are more expensive, risky or not in their best interests. We need a system that universally prevents consumer harm.”

A package of ideas put forward by the SMC include:

• Expand anti-hawking laws to tackle social media lead-generation, click-through ads and online funnels that replicate pressure-sales environments, which includes regulating seminar, telemarketing and referral-based tactics that target super switching and SMSF setups under the guise of “education” or “coaching”.
• Ensure consistently high standards and close any consumer protection gaps in governance accountability, executive accountability under the FAR regime, regulator supervision, and financial resource requirements across all super and investment platforms. Task this work to a joint ASIC-APRA-Treasury review, which should also reassess the trustee-for-hire model.
• Reintroduce ASIC’s 2010 “Investing Between the Flags” initiative and having official alerts when consumers are about to move outside system safeguards, prompting them to confirm they clearly understand the risks.
• Bring back an ASIC minimum recommended balance for SMSF establishment, on the MoneySmart website.
• Task ASIC to comprehensively review its conflicted remuneration guidance in light of practices highlighted by these two collapses.
• Use data-driven surveillance to monitor risk in high rates of super switching or SMSF establishment to identify consumer harm risks early and act sooner.

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