Retirees scammed by super ‘advice’
If you’re tempted to switch superannuation funds, chasing richer returns, read this first.
More and more people are risking their retirement savings because they’ve been led to believe their current fund is underperforming and persuaded to seek higher returns elsewhere.
And that’s the fault of financial advisors who risk undermining trust in Australia’s $4.2 trillion superannuation system, according to Australian Securities and Investments Commission (ASIC) chairman Joe Longo.
ASIC says investigations into financial advice misconduct – where super fund members, especially retirees, are scammed out of their life savings – has doubled in the past year.
The comments come as ASIC steps up its investigation into the failure of the managed investment schemes Shield Master Fund and First Guardian, which were available on platforms such as Macquarie, Netwealth, and Diversa.
Up to $1 billion is at risk across the two schemes, and a compensation scheme is expected to return only $300 million to the 11,000 people affected.
The Australian Financial Review reports that redemptions have been paused, travel restraints have been issued against directors, and assets frozen as authorities determine what money can be returned to investors.
Forty ASIC investigators are probing the conduct of financial advisors who applied the high-pressure sales tactics, as well as platform operators and the research houses that rated the schemes.
Speaking at a Financial Services Council symposium, Mr Longo recounted the story of a 60-year-old victim of the failure “who thought she was taking control of her financial future, only to see it slip away”.
He said, “She started looking online for ways to boost her super balance and began seeing a lot of targeted social media advertisements that made her feel even further behind. These advertisements offered a free superannuation review, and one day, she signed up.
“She had used comparison sites before to get a better deal on her insurance. How different could this be? Soon afterwards, she received a call back advising that her current fund was underperforming.
“They passed her onto a financial advisor, who said she would get better returns if she switched her super into another fund. A substantial portion of her money ended up in a managed investment scheme called the Shield Master Fund. I’m sure you know now where her story is headed…”
Mr Longo said ASIC was repeatedly seeing stories like this in its investigations into suspected misconduct in financial services.
“Stories of shameless sales tactics designed to convince honest and hard-working Australians to transfer their superannuation savings into complex and risky schemes through an SMSF, or more commonly, a platform product. Stories that end with that nest egg diminished or completely dissipated,” he said.
He qualified his criticism by acknowledging that most of the financial services industry does the right thing and “there can be significant benefits for consumers to switch their super or to consolidate it”.
“But we’re seeing more and more people risking their retirement savings because they’ve been led to believe their current fund is underperforming, and they’re being persuaded to move those funds somewhere else in the hope of achieving a better return.”
He said the superannuation system offers “bad actors” a pot of money to exploit, on an industrial scale, and those bad actors are spread through all levels of what is a complex financial services sector.
Disclaimer: This article and any links provided are for general information only and should not be taken as constituting professional advice. National Seniors Australia is not a financial advisor. You should consider seeking independent legal, financial, taxation, or other advice to check how any information provided relates to your unique circumstances.
