Industry, retail super funds clash over advice reforms

Industry funds say reforms will better protect consumers but retail funds and advisers are concerned about the expected red tape and legal risks.

Industry and retail super funds have taken opposing sides on the looming financial advice reforms.

A battle is heating up between retail and industry super funds over looming financial advice reform legislation, with the two groups warring over the impact of the proposed changes on funds and members.

Days after a coalition of industry bodies representing fin­ancial advisers, stockbrokers and retail super funds blasted the ­Albanese government’s proposed advice reform bill, warning it would increase red tape for advisers and lift costs for consumers, industry funds have said the coming changes will help funds protect members from dodgy advisers, including those exploiting loopholes in anti-hawking legislation.

Industry fund lobby group the Super Members Council has called for the government’s Delivering Better Financial Outcomes bill, which amends Section 99FA of the Superannuation Industry (Supervision) Act 1993, to be passed without delay. But retail funds and advisers, represented in a coalition of 12 industry bodies known as the Joint Associations Working Group argue the changes will ­require them to individually ­review every statement of advice, both raising the legal risk for trustees and placing a further regulatory burden on financial advisers and licensees.

A loophole in anti-hawking legislation, which covers financial products but not financial services, added to the urgency for the new laws to be passed, the SMC said. The lobby group is also calling for anti-hawking laws to be tightened to close this cold-calling loophole.

“Dodgy advisers are using click bait-style social media posts, cold calls and high-pressure sales tactics to convince people to change super funds,” SMC chief executive Misha Schubert told The Australian.

“Super fund members are then charged a massive advice fee and plonked into a poorer performing super product. This predatory practice needs to end.

“To give the regulator the teeth it needs to end the rip-offs, anti-hawking legislation should be extended to also ban the unsolicited selling of financial services. And vital consumer protections that obligate super funds to check the appropriateness of advice charged from super needs to be swiftly legislated and not delayed or changed.”

Advisers using cold call lead-generation for financial advice should be banned, she added.

The carve-out in the current anti-hawking legislation was permitted for advisers as this segment was already captured by the best interests duty, which requires that advisers act in the best interests of ­clients when providing financial advice.

But the Australian Securities and Investments Commission last month warned of dodgy cold-calling operators using high-pressure sales tactics to lure people into dud, high-fee funds.

These advisers are charging thousands of dollars to transfer super savers into dud funds, with the fees often coming out of members’ super balances.