Fresh legal action this week by ASIC against one financial adviser alleged to have pocketed at least $34 million in illegal kickbacks and funnelling more than 200 clients into the collapsed funds is a sobering reminder of the critical need for much stronger consumer protections to become law alongside ongoing legal action.
There are now 17 separate court proceedings in train over the two schemes, alongside heightened scrutiny of the people and businesses involved. APRA has also warned executives at fast-growing wealth platforms that bonuses may be clawed back or deferred if urgent investment oversight concerns are not addressed.
The Shield and First Guardian collapses were not simply the work of a few bad actors. They exposed systematic gaps in the safeguards that should protect Australians’ compulsory retirement savings.
The Government’s consumer protection package is a watershed step towards closing those gaps and preventing the next catastrophic collapse, but the reforms must be effective, strong and comprehensive.
And they must be legislated as a crucial priority.
Recent research by SMC showed 81% of Australians expect tighter controls on lead generation practices that use clickbait advertising, engineered sales funnels and sophisticated pseudo cold call operations to push people towards risky products.
There should be a total ban on lead generation in super. Licensing and increasing advice licensee accountability for any lead generators they use would be a step forward – but it still falls short of what the Australian community expects.
Members also urgently need the long-promised financial advice reforms so they can access simple, trusted and affordable advice through their own super fund.
There needs to be greater consistency, transparency, and stronger oversight of advice fees deductions from super. And platform products must meet the same high standards of safety, accountability and governance expected across the rest of the super system, including adequate and effective capital requirements and regulatory powers for when things go wrong.
One part of the package still needs fixing. The proposed changes to the Compensation Scheme of Last Resort should not shift the costs of misconduct onto millions of everyday Australians whose savings are held in safe, mainstream super funds that had no involvement in these collapses. In a truly risk-based scheme, those responsible for the harm should bear the commensurate cost of putting it right.
Every Australian deserves strong consumer protections wherever their super is invested. Parliament has an opportunity to get on with building a safer system that prevents harm before losses occur and better protects everyday Australians so their interests are always put first.
