‘Clickbait’ super ads reaching almost half of Australians: SMC

Almost half (45 per cent) of Australians are receiving “clickbait” ads about switching into risky super funds, according to research from the Super Members Council which has called on the government to expedite improved consumer protections.

Research released by the industry fund body, done by research company Ideally of 1000 people, found that four in five Australians that use social media want the government to take strong action to ban predatory social media advertisements which entice people to move their super into riskier funds.

“The devastating Shield and First Guardian collapses were enabled by shocking gaps in current consumer protections,” SMC said in a media release.

“Those events show how aggressive lead generation practices, high pressure sales tactics and gaps in oversight can be used to funnel Australians out of safe, high-performing, low-cost, regulated super funds and into unsuitable or unsafe super products, losing their life savings and undermining public trust in super.”

Furthermore, just under two-thirds (63 per cent) of respondents were not aware these types of ads were used to switch people out of their super funds into the now-collapsed Shield and First Guardian funds.

Some 70 per cent said it was difficult to tell the difference between a scam and advertising from a reputable source.

The SMC called for removing any conflicts of interest “wherever they arise in the chain”; strengthening trustee and adviser oversight on super switching; stronger super platform and product accountability; “true like-for-like comparisons” at the point of switching including all returns, advice fees and costs; and a crackdown on aggressive selling tactics through social media ads and cold calls.

The latest research comes after the SMC released controversial data about superannuation switching, which led to a refute from the Financial Services Council.

The data, released by the SMC in February, found 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, which the association believes was being driven by social media ads, lead generation or third-party influences and not by long-term financial planning in their best financial interests.

The FSC later refuted this data and argued Australians choosing to switch to a platform from a default superannuation fund are typically older investors with higher balances.

The government is consulting on changes to the professional indemnity insurance, managed investment schemes (MISs), lead generators, platform trustees and the Compensation Scheme of Last Resort.

Among the changes being floated from the government includes a ban on advice fee deductions for super switching, requiring trustees to compensate members for losses, ending ‘but for’ determinations from the CSLR, higher restrictions on lead generation, and more oversight of MISs are among the suite of reforms proposed by the government.

Meanwhile, ASIC has begun publicly naming lead generation services and the licensees using them, even though the regulator conceded that those named are not being accused of any legal wrongdoing.

The new suite of consumer protections comes as the Delivering Better Financial Outcomes reforms were put on the backburner.

The final tranches of the DBFO reforms would’ve given more flexibility for super funds to give advice due to the addition of nudges, the expansion of intrafund advice and the introduction of the controversial second tiered “new class of adviser”.

SMC chief executive Misha Schubert said it’s crucial the government gets on with enacting its promised DBFO reforms and delivers them alongside a package of stronger consumer protections.

“This also highlights why the Government shouldn’t weaken or water down crucial safety reforms,” Schubert said.

“Australians clearly get it: they know that complexity and weak accountability create grave dangers to people’s life savings and make further Shield and First Guardian-style collapses possible.”