ASIC will target “unsuitable” superannuation advice, due to an increased threat of high-pressure sales tactics and social media algorithms putting people into risky, conflicted strategies.
In a media release outlining its “key issues outlook for 2025”, ASIC said it had observed “considerable volumes” of super flows into high-risk investments, including property, with super money being paid to lead generation businesses.
“High pressure sales tactics and the use of social media algorithms to target receptive audiences, has enabled rapid growth in these types of business models,” ASIC said.
“ASIC will continue to warn Australians about this conduct and will take enforcement action where we see misconduct exploiting superannuation savings.”
ASIC has a current surveillance underway assessing the quality of financial advice to establish SMSFs, which it announced a year ago at the SMSF National Conference in Brisbane.
Last week, Professional Planner covered the long-running issue of unlicensed property spruikers engaging people to open an SMSF to invest into risky property investments as high-profile advisers called on the government to add further scrutiny to the growing issue.
In November at FAAA National Congress in Brisbane, ASIC Commissioner Alan Kirkland had sounded the alarm on the telemarketing lead generation services luring referrals to advisers who are putting clients into conflicted advice models, with the Shield Master Fund being a key example.
“We understand that over a two-year period that over $480 million was invested in this fund by thousands of people,” Kirkland said told Congress.
Funds under fire
But it wasn’t just super fund advice by external actors that will draw ASIC’s scrutiny, the regulator also outlined the issue of superannuation members being let down by their funds and trustees.
ASIC highlighted the fact that over the next 10 years, 3 million Australians will become eligible to access their superannuation and hence will have more interactions with their super funds.
Between 2021 and 2023, complaints to the Australian Financial Complaints Authority about super funds’ quality of service doubled.
The regulator will be publishing findings from a review of member services and “will not hesitate to take enforcement action where appropriate”.
ASIC’s increased scrutiny of funds comes as Treasurer Jim Chalmers and Minister for Financial Services Stephen Jones announced they will soon be releasing a new set of member service standards in the superannuation sector for public consultation.
Scam watch
What has become a pet project of Minister Jones, the ‘War on Scams’, will also be a priority for the regulator as the emergence of financial frauds and scams due to evolving technological sophistication has caused extensive consumer losses.
“Evolving types of financial frauds and scam continue to threaten consumers, investors, and small businesses, as people are deceived out of their money and/or into divulging sensitive personal information,” ASIC said.
“Cryptocurrency and celebrity endorsement impersonations are amongst the prevalent scam activities.”
In August of last year, ASIC announced the takedown of over 7300 phishing and investment scam websites looking to trick consumers into handing over personal information following a warning about fake news articles and deepfake videos of public figures endorsing online investment trading platform scams.
Furthermore, the regulator has an Investor Alert List which currently adds an average of 20 companies, businesses or websites per week to warn Australians.
Just how fast the market changes
The growth of private market funds has also drawn the attention of ASIC and will be “seeking feedback” on whether the regulatory settings and supervision approach needs to adapt to the changing market dynamics between public and private markets.
ASIC is also increasing its surveillance in this area and will include reviewing the governance processes and practices of a sample group of responsible entities of retail private credit funds, including their asset valuation and liquidity management practices.
“Both public and private markets are important to our economy and play a role in generating wealth,” ASIC said.
“Through superannuation investments, many Australians have indirect exposure to private assets. Private markets operate differently than public markets and are inherently less transparent.”
ASIC noted banks and lenders’ financial hardship practices as “clearly shown to be wanting” with many people struggling to get help. The regulator said it is working with banks and lenders to improve how they support members experiencing financial hardship and mentioned that some banks have agreed improvement plans with ASIC.