ASIC questions value of default super advertising
The Australian Securities and Investments Commission (ASIC) has told the Royal Commission that there are limits to the usefulness of advertising around default superannuation products.
In its submission responding to the superannuation hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASIC said that while it recognised that advertising could help drive competition and better market outcomes, it had its limitations.
“Advertising, if it works well, can prompt consumers to constructively consider the appropriateness of their current financial product. This includes advertising by super trustees,” the regulator’s submission said. “However, it should be noted that there is a limit to the utility of advertising when consumers are defaulted into a compulsory product.”
At the same time, the ASIC submission suggested that the activities of industry fund HostPlus has proven that the so-called “no employer kick-back rule” within the Superannuation Industry (Supervision) Act was ineffective.
Referring to evidence to the Royal Commission that HostPlus had entertained employers to corporate hospitality at the Australian Tennis Open, ASIC said the issue “evidences that section 68A is ineffective”.
“In that case study, despite significant expenditure from fund assets for the benefit of employers there was no breach of the section,” the ASIC submission said. “This was because the inducement did not meet one of the requirements of s68A, namely, it was not ‘on condition that’ one or more of the employees will be or will apply or agree to be members of the fund.”
The regulator suggested that s68 A(1) be rewritten to prohibit inducements that could be reasonably expected to affect a person’s choice of default fund.
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