REP 50 Superannuation switching surveillance
Released August 2005.
We reviewed a number of adviser files and considered the compliance arrangements of some licensees. We also got statistical information from licensees about recommendations to switch, which we used to conduct detailed reviews of around 260 specific pieces of advice from 19 licensees.
There were three main findings:
- Limited investigation of the ‘from’ fund. Most advisers recommending a switch had made limited or no investigation of the fund that they advised the client to switch from (ie the ‘from’ fund).
- Poor disclosure of the costs, loss of benefits and other significant consequences if the advice is followed. As a resulted of limited or no investigation of the ‘from’ fund, most advisers in our surveillance did not comply with the specific obligations to disclose the costs, loss of benefits and other significant consequences of the recommended switch. In the SOAs we reviewed, disclosure about the basis for the recommendation to switch was generally poor.
- A tendency to recommend a fund related to the licensee. Based on the statistics provided by licensees, there is a strong tendency among advisers to recommend switching to a fund related to the licensee. In these cases, there is a conflict of interest that must be carefully managed in order to avoid the perception that advice is inappropriate or is not given on a reasonable basis, or that the interests of the licensee are placed above those of the client.