In a supplementary submission to the government’s Retirement Income Review, Super Consumers director Xavier O’Halloran expressed concern about the future of consumer advocacy and superannuation advice, forecasting the body’s impending doom without a long-term funding solution.
As it stands, Super Consumers, which is partnered with CHOICE, will see its funds dry up from July 2021.
But the body stated that there needs to be an independent group working for consumers, as the COVID-19 pandemic has exposed a number of problems with the super and financial advice sectors.
“Outside of the current global pandemic, there is a strong need to fund an independent consumer advocate in superannuation,” Mr O’Halloran wrote.
In the 2019-20 budget, the government signalled its intention to establish a consumer advocacy body for super and then held an expressions of interest call-out during December and January.
The process had been implemented after the Productivity Commission recommended an independent, adequately resourced consumer body for the sector in its superannuation efficiency and competitiveness review.
Super Consumers has recommended that the government “urgently fund” a super consumer advocate, listing failures from financial services providers during the pandemic such as insurance policies that didn’t protect frontline workers and misleading advice about the early super access scheme.
In March, the body had used its data analytics capability to identify funds with pandemic exclusions in their bundled life insurance policies and then published the research, which called on the providers to waive the terms.
Within days, Mr O’Halloran said, all but one super fund, had backed down. The last fund, QSuper, bowed out of holding the exclusions weeks later.
“We were concerned that some of the worst impacted came from industry and public sector funds with members from the healthcare, teaching and logistics sectors,” Mr O’Halloran wrote in the submission.
“These were people who were required to risk their lives, but had been let down by their superannuation funds and insurers.
“…These changes would not have been made without an independent consumer advocate highlighting the impact of these exclusions and applying public pressure to get them removed.”
Advice industry body Financial Planning Association (FPA) was also called out in the submission, for “poor quality” modelling in an advice template it made for advisers around the early super access scheme.
The government had lifted restrictions around advice, so individuals could access the early release quickly, including allowing advisers to provide a record of advice (ROA) and state what advice they had given rather than a full statement of advice (SOA).
The FPA, in an attempt to make the process easier for advisers, created a template of advice, including modelling of lost future earnings if people decided to withdraw their super early.
But Super Consumers said the modelling is “likely to mislead any consumers who view it”.
“The FPA template fails to account for the impact of inflation in its modelling, a critical error that goes against ASIC guidance for these types of models in superannuation,” Mr O’Halloran wrote.
“The result is people will be led to believe the impact of withdrawing is far greater than reality. For younger people the FPA’s projected losses are more than double what someone is likely to experience in real terms.
“It is unclear whether this modelling was done to discourage people from early release, thus keeping more assets under management of the adviser, or was just of a poor quality. Either way it points to an ongoing problem with the quality and independence of the financial advice sector.”
When asked about the submission, a spokesperson for the FPA said the body has attempted to contact Super Consumers.
"The FPA is yet to receive any response from SCA and would be more than happy to have this conversation at any time," the spokesperson said.
But Mr O'Halloran told Investor Daily the consumer body had previously spoken with the FPA, with the advice industry association reportedly saying it expected advisers to adapt the template to individual clients' circumstances.
Super Consumers contrasted its own modelling and information for consumers to the FPA’s template, saying its information was available weeks before people could make an early access request and it was "balanced".
According to the body, “at least one” major super fund used the modelling.
“It is important people have reliable modelling on the retirement impacts of these types of decisions and it is a function we are set up to provide,” the submission read.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
