AUSTRALIA - The Association of Superannuation Funds Australia has issued a caution to consumers ahead of the introduction of super choice, warning the practice of mis-selling is already underway.
In its latest report, “Implications of choice of superannuation fund legislation for members, employers and funds”, ASFA warns fund members to be wary of unlicensed financial advisers, adding that the regulator – the Australian Securities and Investments Commission (ASIC) – must be vigilant.
“The biggest risk appears to be advisors mis-selling people into SMSF (self managed super fund) arrangements where the client involved doesn’t have the skills, time or adequate savings to make this viable,” said Philippa Smith, CEO of ASFA.
“Fortunately most instances of mis-selling so far seem to be isolated cases driven by individual advisers, not co-ordinated marketing campaigns by financial institutions.”
However ASFA warned there had been reports of “educational seminars” that had recommended inappropriate or unwise courses of action to employees.
The report predicts about 7.5% of Australia’s AUS$648.9bn in superannuation assets will move following the introduction of choice of fund in July. It suggests 5.7m Australians will have a statutory right to choose their own super fund and of those around 8%, or some 456,000, will exercise that choice.
“Based on survey data of fund members, choice of fund will lead to gross flows between fund sectors of about 6% of members over time,” ASFA said in a statement. “Because individuals most likely to change funds will also tend to have higher account balances, the percentage of assets that will move over time will be higher, at some 7.5%.”
According to the report, SMSFs look set to gain from choice – ASFA expects the 22% of assets currently held in these funds to jump by 4% of total super assets. Retail funds were flagged as the most likely to lose members, however, both retail and industry funds will gain market share from the closure of certain corporate funds.
Most public sector employees and many employees in large organisations covered by industrial agreements will be exempt from the choice legislation.
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