Government urged to shut down predatory super switching schemes

Super Consumers Australia urges the Federal Government to shut down predatory super switching schemes. The call comes with a warning to consumers on how to keep their super safe.

A number of highly sophisticated super switching schemes have been targeting consumers, with up to $1.2bn in people’s retirement savings lost due to the collapse of Shield and First Guardian. These schemes have been fuelled by ‘lead generators’ who have been using social media platforms to collect people’s contact details and sell them on to third parties.

“These schemes are highly effective, they prey on people who are just looking to do the right thing and get on top of their super. They often start by simply offering a super health check, but can end in people losing their life savings in high fees and dodgy investments,” says Xavier O’Halloran, CEO of Super Consumers Australia.

We wanted to understand people’s experience, so we signed up for these lead generation services ourselves.

“When I signed up for one of these services the advisers built up my trust over several weeks. They seemed knowledgeable and were highly complimentary about the interest I was taking in my super. It is a very convincing sales pitch. If I hadn’t worked in superannuation for the last decade I wouldn’t have known the red flags,” says O’Halloran.  

Super Consumers Australia is calling for a ban on lead generation for superannuation and financial advice, as well as a closing of the loophole that allows cold calling offering financial advice.

“Decisions about super can have life-long impacts. It is far too important to leave to cookie-cutter advice over the phone. The cost of poor consumer protections is currently falling on everyone, through direct losses, compensation scheme funding and increased Age Pension costs. Super is often people’s second biggest source of wealth outside of the family home and the consumer protections need to reflect that.”

While we wait for the Federal Government to protect Australians, there are red flags people can watch out for:

• sellers put pressure on you to make a quick decision and sign documents during the call
• they tell you that your fund is underperforming, hiding fees or that other people from your fund aren’t happy with its performance
• someone calls you out of the blue (or after you clicked on an ad) and offers you a free super health check, comparison or help finding lost super
• you don’t spend much time talking to a financial adviser, or the salesperson tells you they have spoken to the adviser for you
• they charge you high advice fees and try to get you to agree to pay ongoing fees for annual advice without clearly explaining the value (the average annual adviser fee currently sits at about $4,700)
• they tell you they can get you much better returns than your existing fund, often promising more than 11% p.a. over the long term (e.g. 10 years).

Further tips on how to protect yourself can be found on the takeyoursuperback.com website.