ASIC bundles advisers in with early release scammers

20 May 2020

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”.

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“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.

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If that is the case, name and shame in the same way APRA is talking to funds that are tardy with the early realease of funds from the current scheme. Rather than tarnish the whole advice industry with a general slur that you dont have to substantiate - produuce some actual data.
Might give ASIC something to do rather than running a left campaign for ESG

But but but, if they don't tarnish the whole industry how will they be seen to be doing "their " job.

If ASIC is seriously concerned about "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", then they need to take action against most union (aka "Industry") super funds.

Union funds constantly badger clients about super consolidation in their websites and client statements. And they charge all members an asset based "intra fund advice fee" which 99% of people never get any service for. It is the biggest fee for no service scam in Australian superannuation.

Oh FFS really ASIC.......

I think it is incumbent on ASIC to actually release the number of 'advisers' that they have found to have done what they have claimed.

All of the things they have identified in the report are terrible. They're also completely illegal under a raft of existing sections of the Corporations Act.

Please stop writing generic reports about it happening and crack on with prosecuting the advisers and the licensees responsible for it!

ASIC.. good to see you keep hitting the easy targets

It is shameful that we still have such greedy imbeciles in our industry.
The last comment about prosecutions is spot on. We have to rid ourselves of these people to get where we want to be in the public’s eyes.

The Supermatch2 should be available to licensed advisers anyway.
ASIC see no issue with trustees having access to it so they can consolidate member accounts with ZERO disclosure of consequences other than an acknowledgement tick box, but then have a crack at advisers for not writing war and peace for the same action.

ASIC is corrupt beyond belief. They accept 'gifts' of enormous value and yet will no longer release their register; they accuse planners of 'unsavoury' activity that they willingly permit union super funds to do daily; they release misleading and purposely inaccurate information to better their own situation while holding planners accountable for even the smallest of issues; they also permit union funds to purposely mislead, misdirect and rort fees from members while holding us accountable for even the smallest incursion om FDS/Opt In or fee generation.

They were right to leave the 'public service'; they are acting in anything but the public's interests.

Industry Super Funds have received constant bad press over the last two months as the reality of their deceitful "marketing strategy driven" investment portfolios have emerged. ASIC obviously wants to look after their Industry Super Fund mates by hitting the financial adviser profession with a generalized attack in the hope that this story hits the headlines of the main stream media. After all ASIC needs to defend its default employer superannuation fund. Does anyone know a financial adviser who has provided advice to a client regarding a Covid-19 early superannuation withdrawal? I won't touch it and every adviser who I know has the same view. People are not asking their advisers, they are going directly to the ATO website and applying for the early release.

I want to see actual examples of this. We are so hogtied at the moment who in thier right mind would spruik early release, and in the knowledge any advice pertaining to it can only attract a $300 fee? It does not meet any sort of logical test. Every licencee is auditing thier advisers in terms of the new coa at the moment. Advisers cannot advertise without licencee sign off, and there is no way stuff like this would be signed off. Advisers have to put way too much work in to lose everything for charging someone $300 for a early release. With fds, opt in, etc you dont just charge ongoing fees to anyone willy nilly. No, somethings not right about this release, it lacks way too much detail, these types of announcements need to be more detailed, name names and companies so we know they arent just gilding the lily to feather thier own nest. I would love to have enough money to sue one of these people, take them to the high court and make them prove these accusations.

wow, ASIC rightfully calls out utterly deplorable conduct by some advisers and they are painted as the bad guys? in this post FOFA and RC world for an 'adviser' to be charging someone up to 4% of their balance for clicking a few Mygov website buttons is in my book no different to early release scammers. But I do agree with some of the comments - ASIC should name, shame and BAN these shysters.

“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.". While I'm not a fan or user of % entry fees (flat dollar is my preference), can ASIC do anything about lawyers who charge up to 30% to "assist" with insurance claims? When the client could, technically, do it same argument that ASIC has with % entry fee.

I'm out

Sick and tired of going to work just to be smashed by compliance, asic

I'm officially done.. The toll this has taken on me is huge..

I have come to the same conclusion as you John. Financial advice has been made an illegal profession. It is not possible to produce a Statement of Advice that cannot be legally challenged. There is zero reward and massive risk so why would anyone want to be in this business. The banks are getting out and Macquarie will not work with a client unless they have $1 million or more to invest. It is time to go and let the government deal with all the orphaned clients. It will be a catastrophe for many people.

There is only one thing that puts a smile on my face these day. That is knowing that the mongrel thugs (union Industry Super Funds) who have instigated the destruction of the financial adviser profession are now finally blowing up. We are at the end of the long term debt cycle and Industry Super Funds are caught with large allocations to overvalued unlisted assets. There investment portfolios were structured to deliver a story for their marketing strategy. They thought they could get away with over allocating to unlisted assets so they could use fake valuations to claim high returns. They thought they would never have a liquidity risk event because they have gamed the system perfectly and captured the majority of SG inflows and also captured the regulator. But there arrogance is bringing them undone. It will be music to my ears when I hear that certain Industry Super Funds have had to write down their unlisted assets by over 50%.

These comments illustrate exactly why we are where we are. This industry excels at throwing stones in every direction but is incapable of looking in the mirror. Advisers rorting the system is in no way surprising. About 50% of this industry are qualified professionals. The rest need to leave so we can rebuild a profession with ethical operators who don't stick their hand out at every opportunity.

Rubbish. While you may not like most other advisers (and I generally don't think overly much of their technical abilities I must admit), it is still a gross exaggeration that only 50% are professionals - qualifications generally have absolutely zero to do with professional conduct, look at the legal profession as a prime example.

I would say that at least 80% genuinely care for their clients and do what would be expected of any other profession, and without being forced to, naturally follow BID well within the commercial realm. There are still cowboys and shysters out there, however there is no feasible way of legislating against that; all professions and walks of life have them, it's unfortunately the worst part of human nature.

I think Stupi, that you will find the comments here illustrate the collective frustration built up over years of the perceivable bias ASIC have in all dealings with our profession, particularly since they were publicly roasted following the GFC and Storm/CFS Margin Lending fiascos:

ASIC's purposely misleading 'reports' with twisted statistics, their predilection for calling any shyster who gave erroneous advice 'an adviser' or worse,"a financial planner' even if that person isn't qualified or licensed, their inconsistencies of handling known issues depending on whether you work for ISA or are an IFP, and last but not least the ever increasing burden of excessive compliance making commercial operation a matter of how high you can charge your fees and the net worth of clients who can handle those higher fees.

Not all planners want to be the superstore glass & chrome ivory tower type, a large number are quite happy running the mum & dad small neighbourhood corner shop variety - but that choice is being ripped out of their hands.

Based on all the above, as is ASIC's design, it is inevitable that you will get your wish and only 50% of us will remain; however it remains to be seen if the 'profession' will be better off by it, or a high fee environment simply attracts more of the 'well educated' shysters.

Sounds to me these guys are true professionals. Up there with Medical professionals ripping off Medicare with over servicing. Lawyer's tapping into clients trust accounts to finance their lifestyles. Accountants creative ways to save Multi Nationals and Millionaires paying tax.

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