Super switching warning

By John Dixon and Rod Brown

The Australian Securities and Investments Commission (ASIC) has begun Supreme Court proceedings against a Sydney financial planning firm, alleging consumers, including teachers, had not been given the required information about the new superannuation fund recommended to them.

In December 2005 the ASIC issued a press release announcing it had commenced proceedings against First Capital Financial Planning Pty Ltd (First Capital), noting that many of First Capital's clients are teachers in NSW.

The ASIC press release alleged that between December 2004 and September 2005, "First Capital advised more than 180 teachers to switch from their state government superannuation to a superannuation fund recommended by First Capital".

ASIC alleges that:

• the statement of advice (SOA) did not properly explain the differences in fees between the state government fund and the recommended fund;
• the SOA did not contain a comparison of the fees to be paid;
• the SOA did not contain details about insurance, including the associated costs, which was available to clients in their existing funds; and
• some of the SOAs contained misleading or deceptive statements about fees and about the past performance of the recommended fund.

ASIC deputy chairman Jeremy Cooper said superannuation was "a long term and important consideration for people, and it's vital that consumers are given certain key information about the impact of switching so that they can make a fully informed decision".

The matter was due in the NSW Supreme Court for a directions hearing on March 10.

Federation has received anecdotal information that some members were under the impression that either the Federation or Department had given some form of qualified endorsement to First Capital to recruit teachers in terms of providing financial advice or the sale of financial products related to the switching of superannuation or for "salary-sacrifice" purposes related to superannuation.

Federation does not give financial advice nor does it endorse any individual or company providing financial advice either directly or tacitly.

The union recommends that teachers exercise caution in making any decision to vary their superannuation arrangements.

First Capital Financial Planning, which is based in North Sydney, is not associated with First Capital Securities Limited and First Capital Finance Pty Ltd, which are based in Brisbane, or First Capital Corporate Limited, which is based in Perth.

John Dixon is the Federation's Assistant General Secretary (Communications and Administration) and Rod Brown is a Federation Welfare Officer.

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March 2006 contents