ASIC Report 779; Superannuation Choice Products: What focus is there on performance?

So ASIC have recently released this report and it made for some interesting reading.

In summary, the report is about the role of superannuation trustees, financial advisers, and Australian financial services licensees in influencing investment options in choice superannuation products and the focus on performance in those options.

This report examines the role of superannuation trustees, financial advisers, and Australian financial services licensees in influencing investment options in choice superannuation products.

It highlights the lack of focus on performance and transparency in underperforming options and emphasises the importance of taking steps to support good investment performance outcomes and reduce exposure to underperforming options.

The document discusses the need for effective communication with members and the capacity to monitor and manage investment options. It provides action points for improvement and discusses regulatory developments and reforms in the superannuation industry.

Additionally, it outlines the importance of good quality financial advice and its impact on members' retirement outcomes, highlighting the link between choice products and advisers. It discusses the review methodology and findings related to advisers, advice licensees, legacy products, and the reliance on research house ratings.

It also points out the need for advisers and licensees to act in the best interests of their clients and consider performance when providing advice.

The report was based on a review of 29 investment options and 3 legacy products across 10 Trustees along with a review of 88 advice files from 26 advice licensees covering 9 investment options.

Key takeaways from this document include –

·???????? That trustees, advisers, and advice licensees play a crucial role in ensuring good investment performance outcomes for members in the superannuation choice sector.

·???????? That advisers understand and demonstrate the importance of acting in the best interests of clients and ensuring that advice is appropriate and compliant with regulatory obligations.

Advisers should prioritise performance, undertake appropriate due diligence, monitor for underperformance, take action when necessary, communicate with members, and have sufficient capacity to manage investment options.

Trustees should not ignore persistently underperforming options, and advisers should not recommend underperforming options without proper explanation.

It is important for Advisers and Licensees to avoid over-reliance on research house ratings and to ensure that members are in products aligned with their goals.

Also highlighted is the importance of financial advisers and advice licensees in providing good quality financial advice to members. It emphasises the need for advisers to consider performance as a primary consideration when recommending investment options and for licensees to have rigorous processes in place for approving and monitoring investment options.

Mentioned is the limitations of research house ratings and the potential risks associated with legacy products.

My thought –

While the analysis identified a number of issues regarding the advice, or lack of, relating to underperforming funds ultimately it comes back to having robust, repeatable, structured processes in place for identifying and evaluating fund performance along with effectively advising and communicating with clients why funds should either be retained or replaced.

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If you wanted to read the full report here is the link

https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-779-superannuation-and-choice-products-what-focus-is-there-on-performance/

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And, if you would like any assistance to review your processes or wish to discuss further, please reach out to me.