The Super Members Council has warned of an “alarming spike” in the number of Australians with small super balances and no pre-existing advice relationship switching out of the APRA-regulated system and into platform products and SMSFs, speculating that lead generators – like those implicated in the Shield and First Guardian scandal – may to be blame.

 “Healthy competition and choice are long-term features of Australia’s super system, but that is not what appears to be occurring here,” said SMC CEO Misha Schubert.

“Alarm bells should be ringing loudly for both regulators and policymakers if a surge into riskier super products is making Australians with lower super balances poorer – and especially if there’s a risk that any predatory operators could be driving it.”

The SMC said that in the “normal course of events” around five per cent of members – roughly one million Australians – switch funds every year. But according to their research, the number of members switching out of the APRA-regulated system is up 17 per cent in the past year, and 70 per cent of recent switchers to platforms and 61 per cent of those switching to SMSFs have modest super savings of less than $100,000 – with an average of $21,7000 for the cohort. Around half are aged under 45.

The SMC suggests that lead generators, like those implicated in the Shield and First Guardian scandal, may be responsible for the switching; seven in 10 of those switching don’t have a pre-existing advice relationship.

“Access to trusted quality advice is very important to Australians’ financial wellbeing and to their confidence at retirement – and great advice from a professional financial adviser can make a very positive difference,” Schubert said.  

“But the patterns in this switching data suggest the effect of other influences – especially for young people with small balances and a high number of people without a pre-existing trusted advice relationship.”

The SMC called for a “strong package” of consumer protections that will remove any conflicts of interest and strengthen safety obligations on any process that involves switching a person’s super. Minister for Financial Services Daniel Mulino has also said that the government will introduce a “cooling off period” for super switching, a reform seen by some as an attempt to stem the tide of switching from industry and profit-to-member funds and into retail platforms and which superannuation advocacy bodies have lobbied for.

“Australians urgently need a comprehensive set of consumer protections, or we risk further Shield and First Guardian-style collapses, which means more Australians losing money they had saved to live on in retirement,” Schubert said.

“Platforms and SMSFs are typically more costly and complex products, and many don’t face the same level of performance testing or regulatory oversight as mainstream super funds, which can be a particular risk for Australians with smaller amounts of super.”

Switching activity
The release of the research follows Schubert’s appearance at the Advice Policy Summit, held by Investment Magazine sister publication Professional Planner at the National Press Club of Australia, where she advocated for lifting consumer safety protections “sky high across the system”.

“[We’re] very supportive of healthy competition across the system. But Australians rightly expect there to be a minimum set of safety features, because, again, this is not any other financial product or service. Superannuation is people’s precious compulsory life savings that are preserved for their retirement.  

“I think Australians do rightly expect that wherever they have their money, whatever types of vehicles they have that superannuation saving in, that there will be some minimum safety speed features that would apply across the whole breadth of the architecture. And it’s really important that everyone rises to that moment in history to make the system as safe as safe as it can possibly be.”

Members switching from industry and profit-to-member funds to retail platforms has emerged as an existential threat to the former, with research from The Conexus Institute* finding that funds including AustralianSuper – which had previously been major beneficiaries of switching – were now in competitive outflow, with more money leaving as a result of switching activity than is coming in.

While it is difficult to discern member intention in switching activity, the clearest industry trend is ongoing movement of members away from the established and dominant profit-to-member funds and towards retail platforms. In The Conexus Institute’s 2026 State of Super report, the majority of the funds experiencing high net competitive inflow rates were platforms that service financial advisers.

High-profile member service failings at funds including AustralianSuper, Cbus and HESTA have also been put forward by some commentators as one cause of heightened switching activity away from industry and profit-to-member funds.

*The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, the publisher of Investment Magazine.