Financial planners and financial planning dealer groups are no longer the super-switching bogeymen of the industry superannuation funds, with Industry Super Australia (ISA) now pointing the finger squarely at the banks and general advice.
The ISA's submission to the Productivity Commission (PC) review into alternative default models strongly urges retention of the current default funds under modern awards model and it has urged the PC to be careful in assessing the arguments of the banks.
Referring to the "sales-driven switching", the ISA submission stated that "among those who do intentionally switch funds, this is substantially attributable to the sales efforts of vertically integrated for-profit providers".
"This was initially undertaken via financial planning networks. Since the Future of Financial Advice Reforms, for-profit providers are increasingly using "general advice" direct institutional sales (i.e., cross-selling of superannuation by bank staff)," the submission said.
It said that while various legislative protections were in place to promote the best interests of members and prevent inappropriate behaviour such as inducement or misleading conduct by providers toward employers, there was little evidence to suggest such protections were routinely enforced.
"That the processes by which most workers join and contribute to a default fund does not function as a ‘market' is evidenced by the fact that while retail funds have on average underperformed relative to most not-for-profit industry funds in terms of net returns to members, they continue to secure a substantial part of the industry, and charge significantly higher fees or margins," the ISA submission said.