Financial advisers have found themselves at the end of harsh criticism from the Australian Securities and Investments Commission (ASIC) over superannuation fund consolidation with the regulator alleging some advisers have been involved marketing “free” lost super searchers which end up being far from free.
What is more the regulator has alleged that some advisers are trying to take advantage of the COVID-19 pandemic to inappropriately pitch to clients the notion of superannuation early release.
The ASIC allegation is contained in an article written by ASIC’s senior superannuation executive leader, Jane Eccleston who claimed that “in the course of our work, and in cooperation with the Australian Taxation Office (ATO), we identified entities (financial advisers, trustees and fund promoters) who were marketing ‘free’ lost super and consolidation services’ searches”.
“These schemes are far from free. They typically erode a member’s superannuation balance by $500 to $1,000 in advice fees that are deducted directly from their account,” Eccleston claimed.
“We have also seen advisers charge a 4% fee based on the consolidation amount. This results in consumers unnecessarily paying for a search and consolidation service, which they could get from the ATO for free. In some cases, the whole of the lost superannuation recovered ends up paid out in fees,” the ASIC executive said.
“We have identified, and are considering, a variety of concerning conduct including:
- Trustees having little to no oversight of how third parties are using their SuperMatch2 access
- Poor quality general and personal financial advice
- Advisers opening a transitional ‘staging super account’ to consolidate recovered funds before monies are moved to the client’s fund of choice (which may never happen), with advice fees being deducted from the staging account
- Lost super search providers setting up fake adviser profiles with a trustee in order to gain access to the trustee’s SuperMatch2 service
- Providers using high pressure sales tactics or forged signatures, leading to members being unable to give informed and legitimate consent to the consolidation
- Issues with fees for no service when advice providers offer an upfront consolidation service, then charge an ongoing asset-based fee with no further service – or receiving monies to which they had no entitlement in other ways. For example, by falsely advising the trustee that they had given personal advice to a member in order to receive advice fees from the trustee
- Advisers inappropriately encouraging members to apply for early release of superannuation and targeting funds that appear to be more lenient in granting the release of funds; and
- Providing members with a lack of balanced—or even misleading—information about the benefits and risks of consolidation, including the potential loss of any insurance cover.”
“ASIC is concerned that some advisers may use the current uncertainty from COVID-19 as part of their pitch to consumers to carry out broader superannuation activities, such as the possibility of early release of superannuation, searching for lost super and consolidating their accounts. ASIC has already seen some ‘lost super search providers’ re-brand as ‘COVID-19 access providers’. This is an area we will be monitoring closely for misconduct,” she said.