Dispensations granted to superannuation funds with respect to intra-fund advice are what many had hoped for but they carry the risk of reputational damage if things go wrong.
Some of Australia’s more vocal and proactive superannuation fund trustees and executives may care to reflect on the old saying, ‘Be careful what you wish for, you just might get it’.
The dispensations that have been granted to superannuation funds with respect to intra-fund advice are arguably what many of them wished for.
They might now wish to take the time to reflect upon the consequences, not least the reputational damage that will follow if and when things go wrong.
Superannuation funds do get things wrong but, unlike financial planners, they are rarely pilloried by the media.
Instead, their mistakes are calmly categorised and counted by the Superannuation Complaints Tribunal (SCT), which noted that in 2007-08 it received 2,498 complaints.
Given the size of the superannuation industry in Australia and the number of people who hold superannuation accounts, 2,498 complaints may not seem like a lot, but it must be remembered that the SCT has limited jurisdiction and, by and large, the complaints refer to the perceived failings of superannuation funds on issues such as death and disability, and fee disclosure.
In other words, 2,498 superannuation fund members felt compelled to make written complaints about their funds on issues arguably far less controversial than financial advice.
It follows that intra-fund advice will likely give rise to a significant upsurge in complaints.
But to whom will members complain? The SCT? The Financial Obudsman Service (FOS)? The Australian Securities and Investments Commission (ASIC)?
And how will these complaints be treated? Will ASIC, perhaps in liaison with the SCT and FOS, act in the same manner it does with complaints against financial planners?
Perhaps more to the point, how will the superannuation funds handle the inevitable negative publicity that will attend allegations of bad advice? Who will undertake the consequent prosecutions and who will compensate those deemed to have been poorly advised?
The statistics collected by the SCT point to a superannuation industry that is far from perfect. The provision of financial advice will serve to magnify the industry’s imperfections and perhaps cause trustees to reflect upon what they were really wishing for.
