POWERED BY MOMENTUM MEDIA
ISA points to bank super switching subterfuge
Industry Super Australia (ISA) has sought to use Roy Morgan Research data to claim Australia's major banks have been quietly switching tens of thousands of their customers into poorly performing super products.
The ISA has claimed this is being achieved by ramping up direct advice sales channels that sidestep laws which would otherwise require them to act in customer's best interests.
The industry funds organisation claimed the Roy Morgan Research data had revealed a doubling in direct super sales advice from the big four banks between 2011 and 2015 that had also corresponded with a 40 per cent increase in the big four bank's super switching market share.
The ISA's analysis of the Roy Morgan data comes at the same time as a Parliamentary Committee begins the process of interrogating the chief executives of the major banks.
Commenting on the ISA's interpretation, its chief executive, David Whiteley said the apparent flow of members from funds with better satisfaction and performance to inferior funds was "not what we would expect in a competitive market with informed consumers".
"These findings point to obvious market failure and urgent scrutiny is needed of the direct sales tactics employed by Australia's banks that sidestep Future of Financial Advice (FoFA) protections," he said.
"The figures show direct advice is growing quickly and at the expense of traditional channels including financial advisers.
"General advice direct from a bank does not need to meet the best interest obligations and it is likely the banks are using this and linked sales incentives to funnel customers into underperforming funds."
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
I'm sorry but I find this hypocritical of ISA. We inherited a large book of old RSP Legacy product that due to the outrageous exit fees , we cant touch as there is no way we can justify the client losing 1/2 of their balance in penalties. Yet we constantly receive roll over notices into an industry fund. When you talk to the client and inform them that they are going to lose 1/2 the value in exit fees, "oh we were told by abc at xyz industry fund not to worry about it"
Sorry but ISA is no better than the Banks, the only difference is that ISA is 100% conflicted, not just abit conflicted
Chris . The penalties are an illusion, a deliberate deception. I showed the sums to leaders of the advice industry and published the explanation in my book that sold 30,000 copies over 20 years ago. Never been challenged . Would anyone like me to publish the full explanation ??
Agree completely Chris. A client of mine was just told by their work industry fund that it was cheaper and performed much better than the account we manage - without one single comparison or question regarding the other fund. When the client said their adviser had shown them it wasn't true, they said that 'advisers lie all the time'. They even said their investment fees are nil. Yet somehow they are the savior to the industry?
Industry funds have just got to stop lying. The new superannuation funds that banks have launched are not "poorly performing". Customers are consolidating their super into accounts that are cost-effective in their own right (cheaper than industry funds) and are saving in many instances $100s (and occasionally $1000s) in fees. They also offer a different investment proposition, which is lifecycle investing, which isn't a one-sized-fits-all proposition. Industry funds are building up large sales forces, spending the national debt on advertising to convince people to switch to them and are developing vertically integrated advice business. Industry funds should stick to that rather than sledging (at best) and lying about their competition (whom they are starting to imitate).