Banks get tricky with super sales
Industry super advocate says Australia's major banks are switching customers to inferior funds.
Industry Super Australia (ISA) claims the big four banks have ramped up direct sales advice for superannuation customers in an effort to switch clients to poorer performing funds, evading financial protection laws and best interest practices.
ISA analysed new data from Roy Morgan Research and found that between 2011 and 2015 Australia's major banks had doubled the level of direct super sales advice.
This activity resulted in a 40% rise among the big four bank's super switching market share.
The industry super advocate says direct advice has been growing rapidly at the expense of traditional channels, including financial advisers.
ISA CEO David Whiteley says switching customers from funds with higher net satisfaction and performance to inferior funds is not best policy in a competitive market.
"These findings point to obvious market failure and urgent scrutiny is needed of the direct sales tactics employed by Australia’s banks that sidestep Future of Financial Advice (FoFA) protections," he said.
According to ISA, general advice from a bank isn't required to meet best interest obligations and standards, allowing these practices to continue.
"This activity supports the need to introduce a 'better off' test," Whiteley said.
"Such a test would require banks to demonstrate that when they switch a member into a super fund, they will not be worse-off compared to their existing super fund."
Whiteley also suggests the government recommence Fair Work Commission processes in order to construct a merit based safety net of default funds, given that 80% of Australian rely on their employers to select a fund for contributions.
Industry super funds have been outperforming retail funds for some time now. Earlier this month the ISA revealed Australia's retirement savings pool would have been $105 billion better off if retail funds matched industry fund returns over the last two decades.
Superannuation is becoming more important as every year passes; our population is ageing and the likelihood of having a pension to fall back on is diminishing all the time.
If you're looking to switch funds, consolidate your super, better manage your self-employed savings or take out income protection for your nest egg, it's best to compare options and make the right decision.