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Did advisers use super choice to protect trails?

The Australian Securities and Investments Commission has confirmed that it has investigated allegations that members of superannuation fund may have been misled about transitioning to MySuper products to protect adviser trailing commissions.

Answering questions on notice from the Parliamentary Joint Committee on Corporations and Financial Services, ASIC confirmed it had received allegations that superannuation fund members holding funds in default investment options had been misled into making an investment choice so that they would opt out of transitioning into MySuper.

“It is alleged that these communications failed to disclose that by making this investment choice the member would continue to pay trailing commissions to an adviser, as well as higher fees and insurance premiums relative to the MySuper option,” the ASIC answer said.

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The regulator told the committee it was in the process of asking 18 [superannuation fund] trustees questions under notice relevant to the issue.

“We have asked questions including how many members moved to choice products, rather than into new MySuper options, as well as what disclosure and advice members received about the transition,” the ASIC answer said.

“We have asked for copies of disclosure documents such as accrued default amount notices as well,” it said.

 




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While looking at advisers, why not look at super fund trustees, and their actions surrounding the "MySuper" transition?

There have been some interesting decisions made on this transition. Not all appear to have been in the client best interest, and some are simply not.

I have encountered a number of strange situations. In one, a member of a large employer fund with a personal investment strategy found their account had been moved to MySuper and was surprised at the change in assets imposed on them. In another, a large bank-owned institution moved a pure equity index option client into MySuper - apparently the member's equity index strategy counted in the "default" category that were moved to MySuper. That same institution illustrated the move to MySuper and the drop in fees the member would benefit from. What was not mentioned, was the cessation of grandfathered commissions to their adviser and that once this was accounted for, the institution's fees INCREASED.

And I've just received three letters from a client with two industry fund accounts. One thanks the client for instructions to merge their accounts (instructions that were never given); another asks for forms to be completed owing to maiden/married name and the final confirms the accounts have been merged. All the same date. So the client has lost life and TPD cover of over $200k and this was done with NO REGARD TO THEIR BEST INTERESTS.

I am more than over having my industry/profession (i really don't care whether we are called a profession, so i see no distinction) rubbished by vested interests, large institutions and wealthy regulators whose interests are not aligned with the average member they are supposed to represent. Sure, do the investigation into adviser actions and assess any findings on their merits, and take appropriate action. But how about this thing that used to be known as "a level playing field"? Can't see that field for the piles of money those vested interests are sitting on.

From working at a product manufacturer at the time. I can confirm that this was a broadly discussed strategy with advisers under the guise of 'personal investment advice'. Despite the fact that these options probably have performed better than MySuper there should of been ongoing disclosure of fees and commission. What do you expect when a super fund member doesn't know who there adviser even is. (other than a name on the statement).

Where the comparable investigation by ASIC on super trustees, especially the ISA group who actively sent out mass mailings and telephone calls to 'preserve' members. along with misleading information & advertising regarding returns?

Unfortunately, I know quite a few practices where 'experienced advisers' switched clients from MySuper to different investment options without SOAs just so they could keep the fees (they dont speak to or service the client). Watch this space, ASIC are onto them as they should be.

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