This week ASIC announced it was taking legal action against two firms over the collapses of Shield and First Guardian, in what ASIC deputy chairwoman Sarah Court called misconduct on an “industrial scale.”
The First Guardian and Shield collapses laid bare what’s at stake when Australians are urged to switch their super out of the high-performing, well-regulated mainstream super system into higher-risk places.
Today, the Super Members Council has called for stronger protections to prevent consumer harm from high-risk super switching.
Australia’s super system is among the strongest globally, but its integrity and public trust rely on robust consumer protections.
We support ASIC Chair Joe Longo’s call for stronger consumer protections such as cooling off periods to give people the chance to “get a second opinion, have second thoughts.”
In addition to backing reforms floated by the ASIC Chair, we’ve outlined a package of six broader ideas for government reform.
First, expand anti-hawking laws to tackle social media lead-generation, click-through ads and online funnels that replicate pressure-sales environments. This includes regulating seminar, telemarketing and referral-based tactics that target super switching and SMSF setups under the appearance of “education” or “coaching”.
Second, a joint ASIC-APRA-Treasury review, tasked with strengthening governance and executive accountability, which should also reassess the trustee-for-hire model where platforms outsource accountability.
Third, reintroduce ASIC’s 2010 “Investing Between the Flags” initiative with official alerts when consumers are about to move outside system safeguards, prompting them to confirm they clearly understand the risks.
Fourth, bring back an ASIC minimum recommended balance for SMSF establishment, on the MoneySmart website.
Fifth, for ASIC to comprehensively review its conflicted remuneration guidance in light of practices highlighted by the two collapses.
Sixth, use data-driven surveillance to monitor risk in high rates of super switching or SMSF establishment to identify consumer harm risks early and act sooner.
The social licence of the whole system relies on strong trust in super and strong trust in good advice – and Australians rightly expect there to be strong uniform consumer protections across the entire system.
The collapses of Shield and First Guardian show the current consumer protections are not uniform enough – and we all have a responsibility to work together to ensure they are.
