Ludovic Theau from Australian Ethical speaks to Laurence Parker-Brown from The Inside Network on what has changed across this investment theme in the last few years. The Inside Adviser
The average financial adviser is older and brings in more revenue than they did a year ago, but that hasn’t translated into a fatter salary according to data from Adviser Ratings.
Advisers warned: Choice super returns must be monitored and explained
The corporate regulator has made it clear to advisers and licensees that guiding clients through Choice super investment options and keeping track of performance is a core part of their mandate.
In a letter posted this week on ASIC’s website, advisers and licensees (as well as super trustees) were told that an internal review had revealed that there was “insufficient emphasis on and a lack of transparency about Choice investment options that failed to meet performance expectations” from stakeholders monitoring the $1.1 trillion invested across Choice products.
“There was little evidence of trustees communicating to members about investment option performance in a targeted manner, and financial advisers were not always addressing underperformance where relevant,” ASIC stated.
According to ASIC Commissioner Simone Constant (one of three recent additions to the regulator’s commission stable), the review into Choice performance revealed some worrying trends. These include a lack of transparency about Choice investment options, and “little evidence” of targeted trustee communication regarding performance. In addition, she said, financial advisers were not always addressing underperformance where it was appropriate.
“Members should be informed about their super investments – not left in the dark if their super investments are not performing as expected, and there may be better alternatives,” Constant said.
The regulator reminded advisers and licensees that they need to undertake performance due diligence before offering and recommending investment options to member clients.
“They also need to take care not to fail in their duties by over-relying on each other or external rating agencies when performing their roles,” ASIC continued.
“Advisers should treat performance as a primary consideration and, where an option is underperforming, communicate why their recommendation is appropriate despite the underperformance and based on the client’s relevant circumstances.
“Advice licensees should have rigorous processes to detect and deal with underperforming investment options when approving products for use by their advisers and address issues in a timely manner.”
