The Association of Superannuation Funds of Australia (ASFA) has called for standardised risk labelling of financial products such as contracts for difference (CFDs) as well as a clear definition of what constitutes a 'retail' investor.
“Ultimately, what we need is a move towards standard risk labelling for products. This is a complex area, but one that is worth pursuing,” said ASFA chief executive Pauline Vamos.
The large number of retail superannuation and retirement investors, including self-managed super fund (SMSF) trustees, need an easy way to differentiate, recognise and be warned to avoid dissolving their super funds through poor investment, Vamos said.
“CFDs are highly complicated products which require more detailed and visible labelling to alert potential investors to the risk of losing their money,” Vamos said.
CFDs are at the high-risk end of investment products and are currently under scrutiny by the Australian Securities and Investments Commission (ASIC), which is undertaking an initiative to improve the labelling and product disclosures on CFDs, which Vamos said is “a great start”.
ASFA continues to feature a warning article about CFDs for investors on its Super Guru website, and Vamos said SMSF trustees in particular may be confused about the risks involved with CFDs.
The level of risk of a product is linked to the definition of what constitutes a retail and non-retail investor, and despite SMSF trustees having larger balances and investing in more sophisticated products, they still need consumer protection, Vamos said.
