Superannuation, a topic that often flies under the radar for many Australians until their 40s, is currently undergoing a significant shift. The movement of retirement savings from retail funds to self-managed super funds (SMSFs) has caught the attention of regulators, and for good reason. This trend, fueled by financial advisers targeting pre-retirees, has led to a concerning lack of oversight and protection for investors.
The Superannuation Switch: A Risky Move
In recent years, there has been a notable migration of retirement savings from major players in the superannuation industry into SMSFs. While this shift has resulted in a substantial increase in total superannuation assets, with Australia's funds under management doubling to an impressive $4.4 trillion, it has also created a regulatory challenge. Over $1 trillion is now held in self-managed funds, leaving a significant portion of these assets outside the purview of the Australian Prudential Regulation Authority (APRA).
This shift has not gone unnoticed by the Australian Securities and Investments Commission (ASIC), the sole investment watchdog tasked with protecting consumers in this space. The recent collapses of the First Guardian and Shield managed investment schemes, which saw over $1 billion in retirement savings disappear, have highlighted the dangers of this trend. Approximately 11,000 investors are still fighting to recover their hard-earned money, a stark reminder of the risks involved.
The Role of Financial Advisers and Lead Generators
Financial advisers have played a pivotal role in this superannuation switching trend. By targeting individuals approaching retirement, they have identified a lucrative business opportunity. Lead generators, often operating as telemarketers, have been the initial point of contact, enticing investors with promises of finding lost super or checking their savings. These hard-sell tactics have convinced many to move their superannuation savings into less regulated managed investment schemes.
ASIC has taken legal action against numerous financial advisers involved, alleging a failure to act in the best interests of their clients. The issue extends beyond individual advisers, as ASIC has also highlighted the lack of due diligence on the part of the platforms that house these investments.
Superannuation Platforms: A Growing Concern
ASIC's focus has shifted to the role of superannuation platforms, which house people's super investments and allow financial advisers to manage their clients' funds. As of December 2025, these platforms were responsible for a significant portion of superannuation member benefits, totaling $424 billion. While this represents only 14% of the total superannuation sector, the rapid growth rate has raised eyebrows.
Super platform member benefits have more than tripled in the past decade, from $123 billion to $396 billion, outpacing the overall sector's growth. Advice fees charged from these platforms have also increased dramatically, growing from $500 million to a staggering $2.3 billion. This rapid expansion has not gone unnoticed by ASIC, which has expressed concerns about the lack of protection for members from harmful advice fee deductions and inappropriate investments.
The Failures of Superannuation Trustees
Superannuation platforms are overseen by trustees, entities legally responsible for managing the funds. However, ASIC's review of these trustees has found that they are "still not doing enough" to safeguard members' retirement savings. The report highlights that trustees are overseeing $2.56 billion in advice fees from over 720,000 advised members, with fee caps as high as $25,000 and one trustee considering a $30,000 cap.
The recent high-profile cases of misconduct involving Shield and First Guardian have exposed significant weaknesses in the platforms segment. These cases, along with the extraordinary growth in platform member benefits and advice fees, have motivated ASIC's review. The report notes that advisers may recommend unnecessarily high-risk, illiquid, or complex investments, leading to significant consumer harm and losses to retirement savings.
Superannuation trustees, including well-known names like Equity Trustees, Macquarie, Netwealth, and Diversa, have approved investments in the First Guardian and Shield schemes. While some trustees, such as Macquarie and Netwealth, have committed to compensating investors following the collapses, many investors in First Guardian are still awaiting the recovery of their retirement savings.
ASIC is taking legal action against Equity Trustees for its alleged failures in both cases. The corporate watchdog has sued the super platform over investments housed on its platforms, sending a strong message to the industry.
The Need for Improved Monitoring
ASIC has called on superannuation trustees to step up their game in protecting members from high-risk super switching. The fundamental role of a superannuation trustee is to safeguard members' savings, and as more Australians approach retirement and seek advice, trustees must urgently improve their monitoring practices. The government's recently announced crackdown on managed investment schemes, lead generators, financial advisers, and research firms is a step in the right direction.
As Xavier O'Halloran, CEO of Super Consumers Australia, rightly points out, platform trustees must remember who they work for. It's not about bringing business through the door; it's about protecting the retirement savings of everyday Australians. This shift in perspective is crucial to restoring confidence in the superannuation sector and ensuring the financial security of retirees.
