The Australian Securities and Investments Commission has laid bare the
super scandal that has been staring us all in the face: most financial
planners are really financial sales people, riddled with conflicts of
interest, and do as little “planning” as possible. ASIC started
examining advice about switching superannuation funds in December last
year and conducted detailed reviews of around 260 specific pieces of
advice from 19 licensees.

It also did a statistical review of switching data
provided by licensees with a related party conflict (that is, they’re owned by
super funds). It found: “of the 4,900 switching recommendations given by
advisers in this circumstance, 90% recommended a switch to the related

It also found that most advisers recommending a
switch had made “limited or no” investigation of the fund that they advised the
client to switch from and as a result of this, most advisers didn’t comply with
the obligations to disclose the costs, loss of benefits and other significant
consequences of the recommended switch.

In other words, most advisers recommended the client
switch super funds without having the faintest idea about the fund the client
was in at the time. There were instances of clients being pushed into
super funds with more expensive insurance arrangements, higher fees in general
with no greater investment choices, and often with no relationship to the stated
goals of the adviser.

ASIC doesn’t say so, but this obviously is all about
persuading people to switch out of industry funds, which don’t pay commissions,
to retail funds which do – even though the retail funds are usually
worse. The fundamental problem is that they get to call
themselves financial “advisers” or “planners” when they are usually just
commission sales people. If they had to call themselves “brokers” or perhaps
“bucket shops” then their clients might understand what they were

Read more on the Eureka Report website here.

Peter Fray

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