ASIC to consider complaints about ISA's 'Compare the Pair'

The biggest problem with the Compare the Pair advertisments is that they assume all super funds earn exactly the same gross, pre-fees return. Then deducting a smaller fee gives a better net result. But clearly all funds do not earn the same pre-fee return. To imply that they do is very misleading.

Good to see ASIC looked at it, but what will Greg Tanzer do about it ?

What I want to know is - Who is paying for the advertising and in whose interest is the advertising. Is it for the benefit of the members? Or is it in the interest of the trade union.

These ads have been running since 2005, so it has taken ASIC 9 years to realise that these ads might be misleading ?

Finally, at least a line of enquiry is to be actioned.

In a world where one of the over-arching outcomes of the FOFA reforms is to provide the general public with the confidence to seek financial advice,the methods used by the ISA's advertising campaigns over some years by relentless repetition that they "do not pay adviser commissions", results in a subliminal and misleading message to all who watch that paying for advice should be taken with caution and most likely is not in their best interest.

If they want personalised financial advice they would likely be directed to Industry Fund Services.

Industry Fund Services is wholly owned subsidiary of Industry Super Holdings Pty Ltd (ISH) and openly state they operate on the principle of "in members best interest ". Interestingly, their FSG dated 1st July 2013, clearly states that they do not "charge or retain any commissions on any products".The FSG clearly identifies that "where an insurance product has been recommended, the issuer of the product may PAY Industry Fund Services a commission" .They also state they will "either waive the receipt of commission or credit it to you".

By the mere fact that a wholly owned advice driven subsidiary of ISH clearly states that product providers may PAY them commissions, (even though these may be passed on to the client), makes a mockery of the relentless attack on Financial Advisers by Industry Super Australia.

If they did not actually receive commissions, then there would be no reason to have to state that "product providers may PAY them commissions".

The question that needs to be answered is are commissions actually paid to and received by Industry Fund Services prior to crediting the commissions to the client ?
I thought it was clearly the ISA's mantra that you couldn't possibly act in the clients best interests if you even received or were paid a commission, even though you may rebate orcredited it to the client?

I wonder if David Fawcett should raise this matter?

Yes these misleading ads have been running for years and ASIC has been asleep at the wheel, again! All the carry on about advisers acting in clients best interests which most of us have always done and yet these ads have been allowed to run which clearly are NOT in consumers best interests because they are one big fat porky pie.

Let's see if there is any action taken.

Regardless of the value of advice piece the issue at hand here is there is an implied guarantee for future values within the ISA projections. The very first warning that investors should understand is that past performance does not provide a promise of future perfomance. No more no less. We all know that and ISA knows that. But we both know that the target audience does not know that. The good thing is that I now receive lots more enquiry about fees than ever before and this brings certainty to the client that they know what they are paying for. The bad thing is there are millions of others that don't know, many of whom are inclined to believe the thinly veiled promises they are being fed.

And all the while the industry as a whole has meekly sat back and watched whilst doing precious little about it for fear of a media and public backlash

"The original 'Compare the Pair' was a work of genius."

So brags Bernie Dean on the Industry Super Australia website.

Mr Dean seems to have forgotten that the original "work of genius" copped Industry Fund Services (responsible for the original campaign) an enforceable undertaking.

The IFS undertook to ASIC that it would:

1. Refrain from using in any of its advertising...projections of retirement payouts or future fund balances [based upon] applying comparisons of fees, unless...it also provided consumers with prominent explanations that those projections are not ...estimates of actual retirement payouts, and that they could change if 'average' fees changed.

The IFS was also to refrain from making representations that the only relevant factor for comparisons of superannuation funds in the context of projections about future fund balances (etc) is the fees charged.

ASIC's RG234 says:

"Where only one particular feature of a product is highlighted, a comparison may be misleading if it ignores other key features."

The Compare the Pair advertisements continue to highlight one particular feature (fees) presented in an unbalanced way. Qualifications are neither "prominent" nor sufficient to correct the misleading first impression created.

RG234: "If warnings, disclaimers and qualifications are required, they should not be inconsistent with other content in the advertisement, including any headline claims. They should also have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing of the advertisement.

The new ads comprehensively fail the "impression on first viewing" test and in any case ASIC reminds us that "...disclosure may not always be sufficient to correct any misleading impression if the comparison is simply inappropriate and unreasonable."

I for one will look forward to the ASIC' enforcement of the original EU so we can weed this "bad apple" out of our industry once and for all.

In the novel "1984", the BIG LIE was what "won" through. So is it any wonder that Industry Funds have to promote the misleading concept that they will better meet investors' long term needs when their performances are so paltry and cannot provide the same level of returns and risk profile given to clients by regular advisers. That is, advisers who do not have tie-ups with developers, fund art work by hippies, direct funds to alternatives where the nature of the investment is unfathomable, use unchanging asset allocations and who do not switch funds managers often enough, and are not affiliated with a Political Party!

The ISA can never compare their funds with those operated by us because we achieve far better results on all metrics. Let ASIC pursue Whitely until THESE ADVERTS ARE STOPPED AND THERE IS NO MORE BIG LIE!

Clients are very happy to pay us for our advice because we provide excellent risk adjusted returns to suit clients' profiles, we inform clients about the significance of important events, births, deaths, marriages, retirement, job changing, insurance (LIFE, GENERAL AND HEALTH) needs, we manage their budgets, we consider the needs of their families, we consider estate planning, etc., NONE OF WHICH IS DONE BY ISA FUNDS!

Don't COMPARE THE PAIR BECAUSE OUR FUNDS AND SERVICES ARE NONCOMPARABLE!

The issue with these ads is - as it has always been - the implication that fees are not just the most important factor in deciding on a super fund but they are the ONLY factor.

This is why the industry funds are so scared of members transferring to SMSF's. People who are setting up an SMSF have clearly realised that fees are not as important as having choice of investments, appropriate insurance, estate planning strategies etc that the industry funds simply do not offer.

The other issue is the rest of the industry's complete and utter lack of effort to address this. To all those who have posted saying "it's about time ASIC did something" I ask the question what were you doing? How many times have you asked your licensee, product provide or even ASIC to do something about these ads? Perhaps you struggle to justify the - mostly higher - fees charged on your recommended products.

To those who are about to can me for my "obvious bias", I am an AR of a product provider who in 17 years has hardly ever recommended an SMSF and has sometimes recommended industry funds. My bias is in the best interests of my clients - nothing more.

Perhaps more importantly, I have always been able to explain higher fees to those clients. As Alan Shepard is quoted as saying "It's a very sobering feeling to be up in space and realise that one's safety factor was determined by the lowest bidder on a government contract.". I know my clients deserve better than that.