More oversight of MIS schemes a good start, but much broader reforms needed to fix serious consumer protection gaps

The Super Members Council welcomes the first step on the path to stronger consumer protections in higher-risk parts of the super system, but a much broader set of reforms are needed urgently to truly make all Australians’ life savings safer in the wake of the Shield and First Guardian collapses.

The Government’s initial consultation paper canvases a modest first instalment on urgently needed consumer safety reforms, focussing on glaring gaps in oversight and governance of Managed Investment Schemes.

But the gravest risks to consumers – including 12,000 Australians being lured from the safety of the high-performing tightly-regulated super system into higher-risk places and products – remain and must be tackled urgently to shut and bolt the doors to grave consumer harm.

The key to making consumers safer is to remove any conflicts of interest wherever they arise in the chain and strengthen safety obligations on any process that involves switching a person’s super.

Such measures would make the biggest difference of all to ensure Australians’ precious life savings are much safer from harm.

The consultation paper includes only one proposed reform on switching risks. Yet the experiences of Shield and First Guardian victims show the need for stronger obligations to ensure consumers are truly better off.

This would ensure consumers would have to be given a true like-for-like comparison of how their super will fare by retirement if they stay or switch, including all returns, fees and costs.

The other key reform to strengthen consumer safety is to legislate key elements of the promised Delivering Better Financial Outcomes (DBFO) reforms to meet the urgent large-scale need for safe retirement advice.

The Council has also consistently called for a detailed deep-dive review on conflicted remuneration and for the official guidance to be refreshed to ensure there are no loopholes in this key consumer safety protection.

The Council looks forward to seeing proposals to tackle lead generation. It has called for a ban on aggressive selling tactics through social media ads and cold calls by expanding anti-hawking laws to prevent contact aimed at generating or transferring leads for personal financial advice or super.

“The Government’s proposals are an important first step, but to truly protect Australians from serious financial harm, the gaps need to be closed wherever risk of conflicts of interest remain,” says the Council’s CEO Misha Schubert.

“A strong suite of broad and bold consumer safety reforms must be delivered rapidly, or even more Australians will be put at risk of being moved into unsafe and risky products that make them poorer in retirement.”