Super war reignited as SMC spars with FSC over member switching

The Super Members Council has warned that “consumers should be wary” about any claims that they would be better off if they switched their super fund, pushing back on arguments made by the Financial Services Council in a report last month.

The industry fund lobby group said platform products have higher standard fees at almost every level; choice platform products do not appear to deliver higher growth exposure in practice; and that consumers should be wary of significant advice costs associated with switching.

“Any credible assessment of the financial benefits of advice must also factor in the cost paid for the advice as well as its benefits,” the SMC said in a media statement on Wednesday.

“Omitting the cost of advice when assessing benefits of a switch should be an instant red flag.”

The SMC also noted that up to 80 per cent of the members who were advised to switch into Shield and First Guardian appear to have been unaware that’s where their super savings were moved. “That’s not healthy, informed choice,” the group said.

The SMC called for stronger transparency and reporting of fees across all products, faster implementation of Delivering Better Financial Outcomes reforms, and stronger trustee-set advice fee caps and universally robust oversight on advice fee deductions from super systemwide to better protect consumers.

Minister for Financial Services Daniel Mulino said on Tuesday that the policy response to the Shield and First Guardian collapse will be revealed next month, with the minister uncommitted to any timeframes on the rest of DBFO.

In June, the FSC released a research report, conducted with NMG Consulting, arguing that defaults being sufficient for most people is a myth and that advised products were more expensive and don’t improve member outcomes in retirement.

“People engaging with their superannuation and making active choices at pivotal life stages – such as early career and retirement – can have a material impact on their financial future,” FSC chief executive Blake Briggs said about the report.

But that report came only days before ASIC released Report 833 Safeguarding super: How well are platform trustees monitoring risks to retirement savings, which criticised platforms for the onboarding and monitoring of advisers.

The report cited gaps in oversight of advisers, advice fees and investment flows where there was a lack of oversight of holding limits, member churn and unusual fund flows.

Both associations have been sparring since the start of the year after the SMC released a report raising the alarm over the “high rate” of super switching. The FSC pushed back on these claims a month later.

The debate has reignited the super wars between retail and industry funds – the SMC’s membership is composed of the major industry funds, while the FSC representation includes retail super funds, platforms, asset managers and adviser licensees.

The SMC, which formed in late 2023 after the merger of Industry Super Australia and the Australian Institute of Superannuation Trustees, has ramped up its attacks on the advice sector, previously referring to “dodgy advisers” in the early days of the aftermath of the Shield and First Guardian collapse.

The group’s CEO Misha Schubert raised concerns over the use of telemarketers pushing clients into high-risk products, but later apologised over the wording of the campaign.