ASIC report: platform super trustees are putting retirement wealth at risk

The Australian Securities and Investments Commission (ASIC) has released a damning report on platform super fund trustees for failing to monitor fund risks, investments, and keep fees under control.

"Trustees are still not doing enough to protect members from harmful advice fee deductions and inappropriate investments on their platforms," the report said.

How are super fund trustees failing?

ASIC reviewed six trustees of platform super funds. Trustees are the entities responsible for managing super funds and ensuring compliance.

Platform super funds are a segment of the superannuation industry that allow advisers to manage multiple investments in one structure (sometimes called a wrap account).

Most Australians have their super in a retail or industry fund, but the platform sector makes up 14% of the sector.

ASIC's findings

ASIC found that all six trustees "had significant room for improvement in their monitoring to protect their members' retirement savings."

ASIC's main concerns are a lack of safeguards to keep advice fees under control, limited protections to stop large fees eroding low super balances, limited checks on advice documents and weak monitoring of advice fees, licensed advisers and investment flows.

Some trustees reported whole months where they didn't check advice documents at all. One trustee only performed 21 checks on advice, but discovered adverse findings in 75% of those checks.

While deciding on advice fee caps is up to individual trustees, ASIC is not satisfied with the approach trustees are taking. The highest cap set by trustees in the review is $25,000, although one trustee proposed a $30,000 cap.

These caps are necessary to ensure fees on low balance funds don't send members' retirement balances backwards.

ASIC's call to action

The superannuation industry manages hundreds of billions of dollars of Australians' retirement wealth.

And 17% of Australians tell Finder they are not confident their super fund is acting in their best interest. A further 6% have no confidence at all.

And recent collapses of the Shield Master Fund and First Guardian Master Fund show that the industry is not immune to misconduct and failure. Especially in the platform segment of the industry.

ASIC's report outlines a range of actions and focus areas for platform trustees. These include:

• Set and monitor fee caps, plus a review process.
• Set better minimum balance requirements for advice fees to protect members with low balances.
• Better processes for checking advice documents, including random sampling.
• Better monitoring and onboarding of advisers and advice licensees.
• Monitoring advice fees for irregularities, monitoring unusual investment flows and holding limits.

What should you do about your super?

ASIC's report shows how important it is for every Australian to look carefully at their super. Worryingly, Finder research shows that 19% of Australians have never looked at their fund's performance.

If you're invested in a platform or wrap account, it's very important to check the fees you're paying and the return. You may be better off in a standard industry or retail super fund.

But every Australian can and should check their super regularly. Here's how to conduct a quick super fund health check:

1. Check your fund's performance. Look at the 10-year performance of your fund and compare it to other, similar funds. For example, if you have a high growth fund that's only returned 6% in the last 10 years while other high growth funds have returned 8% or more, you may want to switch.
2. Check your fund's fees. Compare the fees you're being charged versus other comparable funds. High fees can eat into your balance.
3. Consolidate your funds. If you have multiple super funds, combine them into one fund. This way you can maximise your investment growth and avoid paying multiple sets of fees.
4. Review your investment option. Most Australians are invested in a balanced fund, but you may want to consider higher-risk, higher growth investments, especially if you're younger or have a smaller balance.
5. Check Finder's worst super funds list. If your fund is on this list, it's time to switch.