Minister for Financial Services Stephen Jones has lashed out at super funds over a “catalogue of poor customer experiences” that have emerged over the past year.
In an address to the AFR Super & Wealth Summit on Tuesday, Minister Jones said it was important for super trustees to be held accountable for their customer service.
“Unresponsive, slow, and not member‑focused. This is a $3.5 trillion industry. This is not the standard that members will accept and it’s certainly not the standard the government will accept, and it shouldn’t be the standard, frankly, that funds accept,” he said.
“With 5 million Australians either at or approaching retirement, funds must urgently lift their game.”
The minister pointed to a targeted review by the Australian Securities and Investments Commission (ASIC) late last year that found that approximately 20 per cent of funds failed to consistently respond to complaints within the mandatory 45-day timelines.
He also highlighted a joint review by the Australian Prudential Regulation Authority (APRA) and ASIC (ASIC) this year which concluded that funds exhibited a “lack of progress and insufficient urgency” in embracing the retirement income covenant (RIC).
Additionally, Minister Jones shone a spotlight on a 32 per cent increase in super complaints reported by the Australian Financial Complaints Authority (AFCA) in the last financial year.
“I acknowledge that, for 30 years, the superannuation industry has done an excellent job of building larger and larger retirement balances. Seven per cent per annum on average over 30 years, a source of great pride,” the minister said.
“Funds will need to continue to do that into the future for their younger members. But they will also need to help their older members start to draw down on their savings in a way that best meets their needs. In short, funds are going to need to do more. Much more.”
Regarding the expanded role that super funds will play in providing financial advice in the future, Minister Jones suggested that this provides an opportunity for funds to be more innovative with how they engage with their members and what they are able to offer.
“Superannuation has a unique challenge because we’ve made it so easy for members in the accumulation phase to limit their engagement with their fund,” he said.
“However, the future is likely to require more meaningful interactions between funds and their members and advice will be critical to that. More informed and more timely decisions – absolutely critical – in a safe, consumer‑first environment which satisfy the members’ needs.”
Areas of improvement
Beyond advice, the minister identified a number of other areas of improvement for funds.
“The day-to-day interactions, responsiveness to claims, all of these things need to be done. Improving datasets, improving the knowledge and information that funds have about their information, moving from that very passive interaction that funds have had traditionally with their members to a much more active and engaged interaction is critical,” he stated.
“We should do it because it’s the right thing to do but we should also do it because we understand that the expectation that a member will have of their superannuation fund is not going to be special or different to the expectation that they have in their interactions with any other financial service or any other business and I don’t think anyone to say that we’re there yet.”
Minister Jones also discussed the results of APRA’s latest annual performance test, which this year was expanded to include the choice sector.
While only one MySuper product did not pass this year’s test, more than one in 10 of the choice products assessed failed, which the minister said is “simply not good enough”.
“Every year that people languish in underperforming products, they are missing out on future retirement income,” Minister Jones said.
“Because of our decision to extend the test to further funds, members from the 60,000 accounts with failed choice products have now been notified that their superannuation product is failing them.”
He acknowledged that, as the worst performers exit the industry, the performance test will need to evolve into a “more enduring test”.
“But the test itself will remain. Trustees should be able to demonstrate the value that they provide and that every dollar is being spent in the best financial interests of their members.”
In conclusion, the minister said that the government will continue to hold trustees to account for their investment performance and their customer service.
“The sector must lift its game to help members achieve a dignified retirement and they must be more responsive and more innovative,” he said.
“Members have a right to expect the highest standards from their funds and the highest standards of performance in growing their savings and performance in knowing and serving their members so that outcomes of members are at the heart of the system. That’s the objective of superannuation.”
Yet they want to allow these same super funds to give advice
Its a little rich for Jones to be so critical considering he has continually failed to follow through on his own promises. He should also look in his own backyard with the ATO failing to update MyGov for TSB caps, with some clients still only having their 2022 figures available.
Minister Jones has latched onto the APRA test results here and it just shows how little he knows about the industry he supposedly represents. These letters simply scared people and made brash statements that were then walked back with disclaimers. They did not reflect people’s actual situations and from what I can gather the Govt is trying to scare people out of grandfathering from Centrelink deeming or end up with a CGT bill in their super accounts.
Do better Mr Jones.
Well said Minister Stephen Jones. It’s time someone told the big corporates about the exceptionally poor customer service now pervasive across every part of the corporate world, including government agencies. It’s not just Industry and Institutional super funds putting customers way too low on their priority list of how they resource their services and the culture they develop. It’s time this was looked at by government across the board. ASIC should not be the organisation to drive it, since they are just as bad customer wise as the rest. Maybe we need a whole new corporate ethics and customer service commission…
And yet, these are the entities that are proposed to be given the right to give members financial “advice”, when the best that they are likely to do is to offer alternatives from the range of investment options that super fund has to offer.
That is not advice, it is providing product information. Under present legislation, provided the product information is provided without taking into account without taking into account personal information is legally described as General “Advice”. This is one of the central errors in the 2001 legislation that made the Royal Commission two decades later inevitable. It is also the reason that QAR has been able to perpetuate the pea and thimble trick that converts product information into “advice”.
There is no reason why product providers should be prevented from tailoring product information to suit an investor’s personal circumstances. But even if a product provider’s recommendation is its best option from the limited range available from that product provider, calling it “advice” degrades advice from “in the best interests of the investor” to “the best we have to offer” – from an investor focus to a provider focus.
The first focus of current legislative change should not be development of new legislation, it should be remediation of the basic flaw in existing legislation, specifically Section 766B, that defines any “recommendation or a statement of opinion, or a report of either of those things, that … is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products” as financial product advice. It then defines Personal Advice as taking into account personal information and General Advice without personal information.
QAR recommendations recognised problems with the term General Advice, but instead of correcting the obvious error by removing the word “Advice”, it prosed removing the word “General”, thus describing information from a product provider as “Advice”.
The main flaw in the 2001 legislation was its targets for implementation, initially large institutions, mainly insurance companies that were mutuals that operated for the benefits of policy holders. They soon de-mutualised and developed lucrative businesses based on captive advisers channeling investment into their products and platforms.
It is now becoming clear that the primary targets for reforms are intended to be large super funds that are set to be able to describe recommendations to its members as “advice”. I see no problem with super funds being able to take into account personal information of members to recommend alternatives from their range of investment options. Just don’t call it advice, when it is simply “the best we can offer”.
If the government fails to address the basic flaw in Section 766B, the evidence for the next Royal Commission has already started to accumulate with the reviews reported in this article, highlighting failures in services and designing products to suit member needs.
Super funds need to focus on their internal functions.
Legislating a pretense that their recommendations can be given the benefit of the term “advice” would be a disservice to investors who deserve the option of accessing genuine Advice.