Industry super funds have criticised the government’s proposed separation of product sales and financial advice, saying the plans will fail to protect consumers.
In a submission to Treasury, the Industry Super Fund Network (ISN) said it was extraordinary to introduce a sales recommendation framework and the introduction of other regulatory relief in the financial advice industry without adequate consumer safeguards.
“These proposals appear to be a back door attempt to remove consumer protections around super-switching and to legalise practices which are currently prohibited,” ISN chairman Garry Weaven said.
“Following the Westpoint scandal, the practices revealed in the ASIC Shadow Shopping Survey 2006 and the subsequent AMP enforceable undertaking it is extraordinary that treasury would contemplate reducing consumer protection,” he said.
ISN said the proposals create two systems of product distribution, a piecemeal situation it believes that financial services reform (FSR) was meant to address.
It added that the proposals would be likely to divert significant amounts from voluntary contributions into super.
The FPA has also asked the government to reconsider aspects of the reforms.
Citing potential confusion for consumers and an increasing compliance burden for planners, the association asked that government reconsider its proposal to establish a new category of ‘product sellers’ as distinct from financial advisers.
The draft reforms were introduced late last year and submissions closed on 19 January.
