Less than half of the financial advice provided by superannuation funds to their members was fully compliant with advisers’ best interests duty and related obligations, a review has found.
And a significant number of members were at risk of suffering detriment as a result of following the advice provided.
The compliance rate for retail industry, corporate and public sector funds varied “within a moderate range”.
The Australian Securities and Investments Commission surveyed 25 superannuation funds, commissioning an independent actuarial consultant to analyse 233 files. Eleven of the funds were retail, 10 industry funds, two corporate and two public sector.
The review focused on personal advice and did not analyse general advice. Four of the 25 funds did not provide personal advice.
The most common delivery channels were in-house call centres and advice providers employed by a related party. A majority of funds said they intended to use self-directed digital advice that can generate a statement of advice.
The things that members most often wanted to know about were investment choice, contribution arrangements and retirement planning. Other issues members commonly sought advice on included consolidation, insurance, transition to retirement, death benefit nominations and estate planning.
In 32 per cent of cases the member only received advice about their superannuation, while in 67 per cent of cases the member received advice on another advice topic as well as advice on their superannuation.
Only 49 per cent of the files demonstrated full compliance with the best intertests duty and related obligations.
Thirty-six per cent of the files did not demonstrate full compliance with best interests duty and related obligations, but the file did not indicate that the member was at risk of suffering detriment as a result.
Fifteen per cent of the files did not comply with the best interests duty and related obligations and there was an indication that the member was at risk of suffering financial or non-financial detriment as a result of following the advice provided.
In the main, non-compliance resulted from the provider failing to identify the subject matter of the advice and the member’s objectives, financial situation and needs.
In other cases the advice provider failed to conduct a reasonable investigation into financial products and base all judgements on the member’s relevant circumstances.
ASIC says the review shows “there is room to improve the personal advice being provided to embers.”
The regulator also reported that the proportion of fund members seeking advice is low. The average proportion of members inquiring about accessing advice services across participating retail and industry funds was just 2 per cent.
ASIC says that superannuation trustees cannot assume that because they outsource advice to a licensed advice provider they can simply rely on the AFS licensee to deliver advice service appropriately.
It wants trustees to conduct regular reviews of the appropriateness of outsourced arrangements.