ASIC has released the results of its Shadow Shopping Survey on Superannuation Advice.

The purpose of the survey was to assess whether the advice given to consumers after the introduction of Super Choice complied with the law.

Overall, the survey revealed a wide range in the quality of advice — from highly sophisticated advice at one end, with basic but valuable advice in the middle, through to negligent and
inappropriate advice at the lower end.

ASIC Chairman, Mr Jeffrey Lucy said " the survey found the financial advice industry still has significant work to do before the quality of advice
will be consistently at a level that ASIC and consumers would regard as acceptable.’

The survey revealed that:

• 16% of advice was not reasonable, given the client’s needs (as required by law) and a further 3% was probably not reasonable.
• where consumers were advised to switch funds, a third of this advice lacked credible reasons and risked leaving the consumer worse off.
• unreasonable advice was three to six times more common if the adviser had an actual conflict of interest over the advice given to the client. These conflicts were commonly created where either the adviser stood to get higher remuneration if the recommendation was followed, or the recommended product was associated with the adviser’s licensee.
• In 46% of cases, advisers failed to give a written Statement of Advice (SOA) when one was required. In a fifth of those cases, however, the advice was verbal advice to stay in an
  existing fund.

ASIC will be conducting specific follow up action with 14 licensees in response to issues raised in the survey. The survey raised particular concerns about the ability of these licensees
to ensure their representatives are complying with the law.

ASIC will be sending the survey results to each licensee whose advisers participated in the survey. ASIC expects that these licensees will act quickly to fix any problems identified in the
survey.

 Common problems areas seen by ASIC in the survey included:

• advisers not investigating the client’s current super fund before recommending a new fund;
• advisers overlooking the client’s insurance within an existing super fund;
• SOAs not adequately disclosing the reasons for recommended action; and
• SOAs not adequately disclosing the consequences of switching super funds.

The survey assessed 306 examples of advice given to real consumers who were recruited by Roy Morgan Research. The survey covered 259 individual advisers who were representatives of 102 Australian financial services licensees.