ASIC investigates "misleading" ISF 'compare the pair' campaign

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ASIC has confirmed it has its eye on the Industry SuperFunds (ISF) re-launched “compare the pair” campaign due to a series of complaints about the advertisement being misleading.

The controversial ISF campaign first hit Australian television in 2005 and was subject to an ASIC investigation after a barrage of complaints.

ASIC’s subsequent preliminary view was that the advertisements were likely to mislead or deceive and that the advertising campaign should cease.

Without accepting ASIC’s view, ISF agreed to suspend its campaign in order to address the concerns raised.

But in February this year, the campaign raised its head again, and the ISF launched a new take on the “compare the pair” advertisements.

The new campaign highlights a difference in the performance between an industry and a retail fund.

In an oversight of ASIC at the Parliamentary Joint Committee (PJC) for corporations and financial services last week, ASIC commissioner Greg Tazner was questioned about whether the commission is addressing complaints about the new campaign.

“In terms of the advertising, I know back in 2005 that 'Compare the Pair' ad campaign was pulled up because of what was essentially misleading advertising. That issue is again being raised,” chair Senator David Fawcett said.

He continued that in particular, concerns have been raised around the fact that the disclosure in the form of the very fine print for the average consumer means “absolutely nothing”.

“I have seen, for example, calculations clearly by people who are supporting retail funds where they show that a retail fund's performance for a given set of conditions clearly exceeds that of the average industry fund, let alone some particular industry funds, yet the advertisement would lead the average person to believe that every industry fund is going to deliver a better outcome than a retail fund for all the various reasons that they say,” he said.

Tanzer replied that although he was unable to talk further about the issue, he could confirm that ASIC is looking at the campaign in the context of the complaints that have been made to ascertain whether it is fair or misleading.

In a press release after the launch of the new campaign, Industry Super Australia’s (ISA) CEO David Whiteley said it will strengthen Australians’ awareness about how they can protect and grow their super savings.

“Allowing financial advisers to once again receive a range of sales commissions will eat into the savings of many Australians, and that’s something consumers should take into account when they’re thinking about which fund offers the best performance”, he said.

Whiteley pointed to a comparative analysis of fees together with investment performance over the last decade that show that Industry SuperFunds provide substantially better value to members on average than the retail super fund sector.

He added that Industry SuperFunds don’t pay sales commissions to advisers, and have low fees.

To justify the difference between the “misleading” old ISF campaign and the new one; the press release stated that unlike the original campaign, which used forward projections to estimate the impact of on-going sales commissions on a person’s super account balance at retirement age, the new one uses a model which looks back over the last ten years to compare average net returns that Industry SuperFunds could have delivered their members, compared to the average delivered by retail funds.
 
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  • Melinda Houghton on 2/04/2014 9:43:09 AM

    Apart from being selectively compared rubbish, we could all make the stats say what we want them to, aren't we always told "past performance is not an indicator of future performance?"
    Particluarly if all the rules have changed and the old conditions are impossible to replicate now and going forward?

  • Stewart Hynes on 2/04/2014 9:44:04 AM

    Dear David Whiteley if you are the CEO of ISA and you still talk in terms of Sales Commissions for advisers, well my young man I think you need to re-think your understanding. 1 July 2014 no more commission you goose. Fairdinkum it's time you actually get a bit more professional about the Industry we are all involved with for the good of our clients. Try and remain objective next time!!!!!

  • Good advice on 2/04/2014 9:49:34 AM

    So when will the comparison actually be an 'apples with apples' comparison. When will th efact that the ordinary australian who seeks advice and is far better off having sort and paid for that advice by having a strategy that is far beneficial in retirement than just having a super? I suppose they could always pay a conflicted ISF advisor the same fees to give that advice?
    Most importantly when will a proper investigation be conducted into all ISF funds unit pricing especially against their 'hard assets' , infastructure assets and 'bricks and motar' assets.
    If there was a run on some of the larger industry funds right now would they be able to pay out as per their current disclosed unit price?

  • Adviser B on 2/04/2014 9:50:26 AM

    Ah, the old 'cherry picking' of performance stats to ensure it gives the outcome required.

    ISF's don't have adviser fees because they don't want their clients to have financial advisers. It has been proven time and time again that people who get financial advice are better off than those who never get advice and have no idea what they are doing.

    It's akin to McDonalds seeking to stop people from seeing nutritionists or doctors, by promoting how much they can save by refusing to see a health professional, ie - a vested interest at the overall expense of their clients.

  • Phil on 2/04/2014 9:56:47 AM

    What a joke.

    I went to look up AustralianSuper fund last week to see the first link on my google search takes me to an AustralianSuper page with a banner reading 'you'll be better off with AustralianSuper' followed by 'why has AustralianSuper featured in the top 10 performing funds blah blah blah. No disclosure, astrix or anything on the banner nor anywhere else on the page.

    I went straight to ASIC's website to make a complaint only to get forwarded to APRA, whom then forwarded me onto ACCC who are yet to contact me.

    I would love to see how quickly ASIC would come down on me personally as an adviser if i was to put that exact same statement on the front of my website, in my SoA's and when i am introducing myself.

  • Michael on 2/04/2014 10:24:30 AM

    Years ago the funds management industry should have supported planners with ads targeting the ISA propaganda - showing the Rice Warner 'value of advice' findings.

    Shame on them for being too weak to back us up as they were scared of losing wholesale ISA mandates.

    With the proliferation of SMSFs, mFunds on the ASX and the return of the ISA ads the industry will pay for its shortsightedness in not supporting advisers who have supported retail product.

  • Ben CFP on 2/04/2014 10:48:36 AM

    Okay let's compare the pair! Little Johnny and Mary, same age, same income and same super balance. Little Johnny has an industry fund (no commissions (hello Whiteley from 1 July 14 these were banned - get your facts right!) and apparently low fees and great returns) and no advice. At retirement he has $250,000. Not a bad result. Mary however has one of those really 'expensive' retail funds with poor performance (according to the industry funds) however she receive initial and ongoing advice. At retirement Mary (who according to the industry super funds has paid heaps more in fees and poor performance compared to an industry fund) has a super balance of $345,000. See the industry funds are so much better! Aren't they?

    Typical industry fund propaganda! Let's work out our best reults and compare them to the worst result from a retail fund and then hammer the TV with it. Oh by the way, who is paying for these advertisments? Surely not the investor! Must be coming out of the CEO's pocket.

    I am so sick and tired of these industry funds making a mockery of what we, as professional advisers, do for our clients. We make a 'REAL' difference unlike them who's only claim to fame is a set of cherry picked numbers and an expensive add campaign.

    ASIC need to pull their finger out and really give it to them! Fine them big time and make them publicly appologise via an extended add campaign, similar to what they are doing now. Enough is enough and it is time our profession stood up and gave it back to them. My clients will be far far better of than any member in an industry fund who sits on their nelly because their industry fund told them they were the ants pants and their fund will be the fix all to their retirement situation.

    WAKE UP ASIC and WAKE UP AUSTRALIA!

  • Adviser B on 2/04/2014 11:10:25 AM

    I find it VERY misleading to include adviser fees in their comparisons to highlight the difference, but without including the difference that actual advice makes. Will the average Bob understand transition to retirement strategies and undertake these correctly without ANY advice? Will the average Mary have adequate insurance across a range of insurances, without having any help in this area? So many areas that professional advice helps out in, yet the Industry funds only focus on the costs of the advice, and ignore the benefits. So very misleading and deliberately so.

  • Chris on 2/04/2014 11:20:12 AM

    What the compare the pair does not include is the loss of earnings members recieve for insurance benefits that are added without consent and often duplicated.By the way dont expect the major investment houses to go into bat for advisers when they have a vested interest providing funds managenent advise to the industry funds . Tell me why hostplus and Cbus etc sponsor football clubs when all profits go back to the members ???

  • Good advice on 2/04/2014 11:33:56 AM

    I just recieved this from a friend of mine who works at Holden and finishs in June. It was a response to my newsletter yesterday about the Australian currency. Is this the $220 per hour advice they recieve? No risk profile, no discussion on risk etc

    Hi Tony,
    That’s interesting especially in light of my current situation with Super. I have my nearly 200K with Aust Super, with 50% in a High Growth Fund and 50% in Australian Shares. Given High Grown contains 34% Aust shares, this position has made me overweight in Aust Shares, however as they’ve performed well, this has been a good thing.

    That said, looking to the next 5 years, I’m trying to determine where I should put my Super. I’d originally thought the International markets may pick up more over the next 5 or so years, so I was thinking of reallocating my Super as follows:

    50% High Growth (34% Aust Shares, 35% international shares, 10% property, 12% infrastructure, 9% Private Equity and 2% Cash)
    20% Aust Shares
    30% International Shares or International Shared – Hedged.

    However an Aust Super financial advisors suggested I just put it all into High Growth and let the fund manager sort it out.

    To be honest I don’t know enough to know I’m making a good decision (it’s different with Bike stuff – there I know what I’m doing, but it much simpler).

    Anyway – I might pick your brain next time we’re riding, which is the subject of a different mail.

    Cheers,

  • David from Perth on 2/04/2014 4:15:52 PM

    Earth to David Whiteley your Lost in Space and have just come back to the planet 10 years back in time as your not up to speed with this profession. Sales comission has gone, yes we charge fees and yes you have salaried staff, who cares most consumers realize that we need to be paid just like your staff. You dont look after them , we do.

  • Adviser B on 3/04/2014 9:48:34 AM

    That's the beauty of averages - approximately half are below average, and half are above. So, as long your fund performs above average (like around 50% of the retail funds), then of course you will happily compare your fund and highlight against the masses, combined with careful selection of your timeframes to maximise the difference and careful selection of what fund you pick too.

    "Hmm, May 2002 to April 2012 looks bad in terms of figures? We were below average? Try November 2002 to October 2012... there we go, we performed better than average for that period. We have our 'Over 10 years' to run with in our ads! That will trick people!"

  • James Smith on 3/04/2014 10:54:25 AM

    What is being compared ? We all understand that range of investment options available don't we ? On what basis do they make the comparison ? We also understand that fees vary depending on account size and product - so how is that factored in to the analysis ? And are fees deducted before performance (ie the unitised pricing of retail funds ) or are they deducted separately ( as with many industry super funds which are not unitised). If this is not bad enough, the FOFA changes will let them switch super funds into the industry fund coffers without advice or checking the facts ? How is it possible that the industry fund sector get away with this blatant manipulation to market their product ? Unbelievable.

  • Tash on 3/04/2014 11:02:46 AM

    The ISA campaign has a simple slogan that resonates with the public. Unfortunately it has its genesis in the incorrect analysis of the underlying data, which it holds out to be 'truth'. To discredit the campaign, we need to discredit the research. Fortunately, you can drive a truck through it, and I'm happy to do so. If someone has access to the actual Rice Warner research data, can they send it to me? joshtash@bigpond.com

  • Mike on 3/04/2014 3:16:10 PM

    Balanced comparison huh?? If we made similar unsubstantiated claims in advice to clients we'd soon get a 'please explain'
    All the focus by ISF's on advisors fees causing diminished super accounts - There's an awful lot of TV advertising and print promotion by ISF's - Where does that money come from??? Couldn't possibly come from members funds, could it.
    However of real relevance is this, where is the FPA, who get large annual fees, from their advisor members, when it comes to publically debunking this ISF garbage??? It seems it's always left to individual advisors, like Melinda [great work] while the FPA remains ominously silent, despite the fees they collect, supposedly to do exactly this.

  • James Smith on 4/04/2014 9:23:00 AM

    These ads confirm that the industry funds cannot be trusted - they will do whatever it takes to sell their product - so their behaviour needs to be regulated. ASIC where are you ? The alarm bells are there for all to see. The first step is to scrutinise the basis of the calculations they have used in these ads. Step 2 is to penalise them for misleading conduct and ban the ads. Step 3 is to run your own ads to clarify the misleading nature of these ads and provide a helpline for individuals to call if they have acted on the claims made in the ad. We can manage this with our clients but what about those without advisers that have been sucked in ? Consumer protection. Does anyone care ?

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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