Super Members Council, the lobby group for the major industry funds, has called for policy change amid an “alarming” rise of superannuation switching.
Data released by the SMC on Thursday said that recent switching activity from “mainstream, high-performing, tightly regulated funds” to platform products and SMSFs has increased 17 per cent over the past year from the usual churn rate of 5 per cent.
The SMC said that seven in 10 members switching did not have a pre-existing advice relationship, which the association believes “could potentially” be driven by social media ads, lead generation or third-party influences and not by long-term financial planning in their best financial interests.
“Healthy competition and choice are long-term features of Australia’s super system, but that is not what appears to be occurring here,” Super Members Council CEO Misha Schubert said.
“Alarm bells should be ringing loudly for both regulators and policymakers if a surge into riskier super products is making Australians with lower super balances poorer – and especially if there’s a risk that any predatory operators could be driving it.”
SMC analysis of five large profit-to-member funds examined outward rollovers to complex platform-based funds, which it says “typically have significant external advice fees”.
The association’s analysis claimed that members switching to platform based super funds and SMSFs face over $160 million extra in fees and costs per year compared to if they had stayed with an industry fund.
It also said that younger, lower balance members (under $200,000) are more likely to switch than pre-retirees, with about half of switches coming from members under 45 years old.
The report comes days after Schubert appeared at the Professional Planner Advice Policy Summit to call for higher standards of consumer protections in advice and super.
“I have talked a bit in the public square about the importance of us trying to shut and bolt the door to consumer harm for all time and I mean it,” Schubert told the summit on Monday.
“This is a really reflective moment for the system architecture as a whole to think about in whatever role we play, how do we close that role to harm and how do we make sure these sorts of things can never happen again.”
Minister for Financial Services Daniel Mulino told the summit that more consumer protections were coming which had been teased late last year.
But while Shield and First Guardian has been used as a cautionary tale by the industry funds as to why consumers shouldn’t leave the profit-to-member sector, research from The Conexus Institute* showed the commercial realities for industry funds.
The Institute’s 2026 State of Super report found that competitive growth prospects for the industry funds are becoming more challenged as competition from retail platforms – particularly HUB24 and Netwealth – grows.
CoreData Research found 70 per cent of super switches are driven by advisers, with service being a key reason for the switch.
Investment Trends’ latest platform benchmarking report, released on Thursday morning, found that HUB24 and Netwealth continued to rate highest for adviser satisfaction due to the quality of services and features.
HUB24 managing director Andrew Alcock told the Advice Policy Summit this week that it’s important that any consumer protection reforms don’t impact choice.
“Choice leads to engagement, it leads to ownership, it leads to active decision making required for citizens in our nation to be able to maximise the value of their retirement savings out of this great system,” Alcock said.
“We need both systems – we need a default or a standard – we also need choice. It’s the backbone of a democracy, it’s backbone of our type of society. It creates innovation and competition.”
Netwealth managing director Matt Heine also told the summit that despite the company’s setback in the First Guardian collapse, they are committed to continually uplifting processes.
“There’s a lot of work that’s being undertaken to make sure that in a choice environment – and we are totally committed to choice – that the appropriate scaffolding and framework is in place to make sure that the advisers and the advice firms that we work with can access the best products for their consumers and deliver the outcomes that they’re all looking for,” Heine said.
The Financial Services Council, whose membership includes the major adviser platforms, declined to comment.
Industry response
WT Financial Group founder and managing director Keith Cullen told Professional Planner it’s impossible to entirely remove risk from a trillion-dollar system but that it can be managed with proper underwriting for when things go wrong and that’s where the policy focus should be.
“Layering more legislation on top doesn’t fix misconduct,” Cullen said. “Enforcement and supervision do.”
Infocus founder and managing director Darren Steinhardt said that it was important to consider what separates a “member” from a “client” and why personalised service can be a driver for leaving a super fund.
“I do agree that there needs to be things that happen within that ecosystem that protects consumers, but it’s also got to not take away choice from consumers,” Steinhardt said.
“But what I do despise seeing is where people are sold on a self-managed super fund to fund an off the plan property that they couldn’t afford if they’re doing it by themselves. The inappropriate superannuation switching has been disgraceful.”
Financial Advice Association Australia chief executive Sarah Abood said there wasn’t anything “diabolical” in the comments from the SMC but said there should be research to understand what is driving the switching behaviour.
APT Wealth CEO and adviser Andrew Dunbar said that choice in superannuation isn’t the problem, poor governance is and Australians are attracted to greater control and input over their retirement savings.
“That is a positive trend, and competition is essential to keeping the system accountable,” Dunbar said.
“The focus should be on better safeguards, monitoring and education, not reducing consumer choice. It is critical for all elements of the ecosystem, from ASIC, to funds, to platforms, and advisers to take responsibility for their area and do their part to prevent these failures. In the case of Shield and First Guardian, all of them failed.”
Wealthadvice principal Marisa Broome said that for a lot of younger people with lower balances who can’t get advice that are susceptible to high-pressure sales tactics.
“There are a lot of people who are not being well-served by the existing super system and therefore go looking for better – in their mind – alternatives and they’re easily influenced by lead generation and not advisers in this case,” Broome said.
More4Life Financial Services financial adviser James Walker-Powell said the “elephant in the room” is the way some funds, particularly industry funds, are being positioned versus how they are actually invested.
“It’s not uncommon to see a ‘balanced’ option within the industry fund network holding close to 90 per cent growth assets, despite the industry accepted definition sitting closer to 50–60 per cent growth,” Walker-Powell said.
“Let’s address this core issue first, as it’s a significant driver of member misunderstanding and risk misalignment. Once we’ve clarified that piece, the industry can dig further into any additional areas such as lead generation tactics.”
‘Dodgy advisers’
Schubert previously received significant heat from the advice profession or “dodgy adviser” comments she later apologised for.
“Dodgy advisers are using clickbait-style social media posts, cold calls and high-pressure tactics to convince people to change super funds,” Schubert told The Australian newspaper in June 2024.
“Super fund members are then charged a massive advice fee and plonked into a poorer performing super product. This predatory practice needs to end.”
The comments came in the early days of the Shield and First Guardian scandal at a time when ASIC had taken action against the funds but when the extent of the misconduct was yet to be revealed.
Schubert’s comments at the time coincided with an ASIC report into cold calling and high-pressure tactics leading to super switching.
The recent article highlights how industry superannuation funds are increasingly facing net outflows of funds under management as members and balances shift toward retail platforms and adviser-led products, putting pressure on traditional industry fund models. Research shows that some major industry funds are now seeing more money leave through competitive switching than they attract back in, an issue that has become significant enough to prompt industry lobbying efforts and public commentary.
Given this backdrop, it’s not surprising that there is heightened lobbying activity — larger funds under stress naturally seek to influence policy settings that affect member behaviour and switching. Within that context, the commentary around super switching and regulatory engagement reflects broader competitive dynamics rather than a standalone critique of advice.
The “alarming” framing itself. Members leaving industry funds is only “alarming” if you’re the one losing funds under management. From the member’s perspective, this could just as easily be described as consumers exercising choice in a competitive market — which is exactly how the system is supposed to work.
The $160 million “extra fees” claim. This compares platform fees in isolation without accounting for what members get in return — personalised advice, tailored investment strategies, greater transparency, and better service. It’s like saying a restaurant costs more than a canteen while ignoring the quality of the meal. It also conveniently ignores hidden costs within industry funds, including the mislabelling of asset allocations that Walker-Powell raises — so-called “balanced” options holding close to 90 per cent growth assets.
“Seven in 10 didn’t have a pre-existing advice relationship.” Presented as sinister, but completely normal. Most people find an adviser when they decide they need one — they don’t already have one on retainer. The SMC frames the absence of a prior relationship as evidence of predatory behaviour, when it more likely reflects people proactively seeking professional help for the first time.
The “could potentially” weasel words. The SMC says switching “could potentially” be driven by social media ads, lead generation, or third-party influences. That’s not evidence — it’s speculation dressed up as a finding. You could say anything “could potentially” be driving anything.
Younger, lower-balance members switching is presented as a problem. But Inwood’s own research from just weeks earlier found that lower-balance members get the greatest uplift from advice in terms of satisfaction, outcomes, and confidence. So which is it? Are these people being exploited, or are they the ones who benefit most from engaging with the advice system?
Using Shield/First Guardian as a blanket justification. The SMC consistently leverages this scandal to argue against switching generally, when Shield/First Guardian was a failure of enforcement and supervision — not a failure of consumer choice. As Cullen puts it, layering more legislation on top doesn’t fix misconduct. And as Dunbar notes, every part of the ecosystem failed in that case, including the funds themselves.
“Shut and bolt the door to consumer harm for all time.” Sounds noble but is practically meaningless — unless what you actually mean is restricting competition. You cannot eliminate all risk from a trillion-dollar system. The question is how you manage it, and the SMC’s answer conveniently involves making it harder for members to leave.
The fundamental contradiction. The SMC positions industry funds as “high-performing” and “tightly regulated” — so if that’s true, why are members leaving? Their own data shows a 17 per cent increase in switching. Rather than asking what they’re doing wrong on service, transparency, and member experience, they’re lobbying to restrict the exit door. That’s not consumer protection — it’s market protection.
The Super Members Council (SMC) fails to mention that many (most) Industry Funds have underperformed the market for the past 3 years – the SPIVA phenomenon. Hence they have reversed the table showing their 10 year returns first.
Younger/smaller super clients can do their own comparisons & make their decision.
Advisors are obliged to do a light for like comparison and when industry funds underperform the benchmark by 7% per annum three years compounding, it’s an easy argument