The Financial Services Council (FSC) has released a new industry standard for superannuation platforms designed to strengthen investment and adviser governance practices.
“The Wrap Superannuation Platform Trustee Investment and Adviser Governance Principles: Standard and Better Practice Guidance” comes in the wake of the Shield and First Guardian master fund collapses, in which 12,000 Australians are estimated to have lost more than $1 billion. Some of those losses were through investments offered on platforms.
“Consumers should have confidence that superannuation platform trustees are applying scrutiny to each investment option that they offer on their menus, while still preserving the flexibility and choice that members value,” FSC chief executive Blake Briggs said.
“This standard reflects the industry stepping up. We are not waiting for legislative change, but are acting now to uplift practices under existing laws.”
FSC platform members cover around 89 per cent of total platform funds under management and the seven largest wrap platforms by market share.
The standard strengthens expectations around initial due diligence of investment options, the use of holding limits, requiring trustees to consider limiting the amount of a member’s portfolio that can be invested in one option, and ongoing monitoring of investment operations.
It also outlines expectations concerning the governance of advice businesses using platforms, oversight of advice fee deductions and protections for unadvised members, which might include limiting access to a simpler investment menu.
“Within the range of policy options being considered, there are several worthwhile and significant reforms being proposed, including enhanced MIS (managed investment scheme) governance and surveillance, curbing harmful lead generation and requiring trustees to stand behind their investment governance processes, which together would strengthen the system and materially reduce the risk of inappropriate products being mis-sold under conflicted commercial arrangements,” Briggs explained.
The standard is due to commence from 1 July and will include a six-month transition period before full compliance is required.
