The Association of Superannuation Funds of Australia (ASFA) has called for clarity around risk labelling for financial products in order to protect Australians' retirement savings.
Appropriate risk assessment standards for financial services products are vital if investors are to fully understand the nature of risk and have the confidence to engage with their future retirement savings, ASFA chief executive Pauline Vamos said.
"We need to recognise that, particularly in superannuation and retirement, we have a large number of retail consumers," she said.
"These include self managed super fund (SMSF) trustees and people in retirement who have spent a lifetime saving for a moderate or comfortable lifestyle.
"To combat people dissolving their super funds through poor investment, we need an easy way to differentiate, recognise, and be warned against risk.
"Ultimately, what we need is a move towards standard risk labelling for products. This is a complex area, but one that is worthwhile pursuing."
Vamos highlighted contracts for difference (CFDs) as one such high-risk product currently under scrutiny by ASIC.
"CFDs are highly complicated products that require more detailed and visible labelling to alert potential investors to the risk of losing their money," she said.
"ASIC's initiative to improve the labelling and product disclosures on CFDs is a great start.
"There have been too many examples of SMSF trustees and retirees losing money, particularly where a non-conventional investment is involved, as was evident in the collapse of a Melbourne investment group which offered the product."
Vamos added that identifying and adequately disclosing the degree of risk attaching to a product directly relates to defining who is a retail and non retail investor.
"Reviewing what constitutes a retail investor is on the government's agenda," Vamos said.
"In defining what this means we must be mindful that there are growing numbers of SMSF trustees and retirees that will be purchasing more sophisticated products and, even though their balances may be large, they still need consumer protection."
