The Australian Securities and Investments Commission has told superannuation funds they will be temporarily allowed to give limited financial advice to members, following a spike in call centre enquires in the midst of the financial crisis.
In a "no action letter" sent on Friday, ASIC told super funds that it was prepared to grant temporary relief from strict compliance with the Corporations Act (2001), which requires any information that may constitute financial advice to be provided by a licensed planner and accompanied by a Statement of Advice (SOA).
It is understood that ASIC has acted in response to super funds’ concerns that young members have been switching to conservative cash options and crystallising the losses of the past 12 months without seeking financial advice. Funds will need to apply to ASIC, who will examine each fund’s request on a case by case basis.
ASIC and the industry bodies emphasised that the decision was not made over concerns that a widespread flight to cash might create liquidity problems for super funds. Pauline Vamos, chief executive at the Association of Superannuation Funds of Australia (ASFA), said it was about ensuring that members with a long investment horizon understood the implications of switching investment options at this point in time.
Fiona Reynolds, chief executive at Australian Institute of Superannuation Trustees (AIST), said that while funds had seen a drift to cash away from growth assets, member switching rates remained relatively low and were off a low base. In the case of one fund, the proportion of members in its capital guaranteed products – while having doubled in recent times – had only risen from 1 per cent to 2 per cent of total membership.
Health Super received the notice on Friday, and chief executive Chris Clausen said that the fund planned to apply for the exemption once it had had time to perform its due diligence.
Reynolds said the measure would help members during the market turbulence and economic uncertainty. “Obviously at this time of high market volatility, some members are looking for more guidance and information from their super fund,” she said. “It is particularly important that members have full access to information about the effects of moving their super into different investment options”.
However, David Atkin, chief executive at Cbus Super, said that his fund “would not be seeking an exemption from ASIC, as we believe we can give appropriate advice under our current arrangement”. Cbus has its own embedded planners, to whom it directs member enquiries for financial advice.