Choice ads misleading - FPA

By George Liondis

CONSUMERS’ retirement savings are being put at risk by misleading advertisements in the lead up to choice of fund, and industry funds are one of the main transgressors, the FinancialPlanning Association (FPA) has claimed.

FPA chief executive Kerrie Kelly said last week many choice-related ads were inaccurate, confusing and created the false impression that consumers would need to change funds on July 1.

“We would like to see more messages saying there is no need to change on day one and more organisations promoting a considered, long-term approach,” Kelly said.

“By creating a sense of urgency for change, advertising will end up confusing and misinforming superannuation fund members.”

In a move that is certain to inflame ill-feeling between industry funds and financial planners, Kelly singled out the union-backed schemes, which have been running advertising campaigns stressing their low fee credentials, for special attention.

“We are concerned that industry funds are just focusing consumers on fees and we believe that super has to offer much more than just fees,” she said.

“By focusing on that area alone, we do not believe industry funds are providing enough information to their members to make an informed choice.”

She said ads suggesting that the fees for retail corporate super master trusts were more than double those of industry funds were incorrect.

Research into superannuation fees released by Rice Walker actuaries showed that, for employers with greater than $5 million in funds under management, retail corporate super master trusts charged 1.14 per cent in fees, while industry funds charged 1.17 per cent, Kelly said.

Kelly also hit back at claims that financial planners would be responsible for churning and mis-selling under choice.

“The situation is that as people become aware of choice, they are going to need access to appropriate information,” she said.

“I am concerned that Australian consumers may not have access to such information because of inappropriate campaigning.”

But the industry fund movement has rejected the criticism.

Industry Fund Services executive chair Garry Weaven said advertisements had included information about fund performance and other superannuation features as well as fees, but that fees were a key consideration.

“I think it is reasonable to focus on fees. I think it is the one thing you know for sure. As ASIC says, past performance is not a good indicator of future performance,” he said.

Weaven claimed the Rice Walker data seized on by the FPA referred to management expenses as a percentage of assets — something which meant that the higher average account balances in master trusts disguised the fact that in dollar terms the master trusts have much higher fees.

In a stinging broadside at the financial planning profession, he renewed his call for the Government to ban advisers from being able to take commissions in regard to superannuation-related advice.

“I am not putting the blame on individual financial planners per se,” he said.

“The problem is with the regulatory environment. It is not reasonable to expect financial planners, who are paid by commissions, to act in the best interests of their clients in respect to super.”