Edwina Maloney, AMP’s Group Executive, Platforms, commented:
AMP supports the intent of APRA’s Annual Performance Test, which is to hold the superannuation industry to account to consumers for investment returns.
All of AMP’s default super options have passed the test and the majority of Trustee Directed Products have passed the test.
However, the extension of the test this year to a small subset of wrap investment options deemed to be Trustee Direct Products, will cause confusion and potential harm to consumers invested in them.
In its current form, the test applies a ‘one size fits all’ methodology to these wrap investment options which, in some cases, are designed to offer different risk characteristics and performance outcomes than contemplated by the test.
In many cases investment options that haven’t met the test’s benchmark are legacy closed funds. Advisers and their clients have chosen to remain invested in these options because they have assessed that moving will not be in the member’s best financial interest due to capital gains tax, transaction costs and potential loss of valuable insurance arrangements. Members could suffer financial detriment if they choose to move now as a result of the test, without first seeking advice.
Amid a financial adviser shortage and the Quality of Advice Review aiming to simplify the advice process, advisers will be required to spend unnecessary time helping consumers understand these confusing outcomes, rather than helping more Australians.
AMP continues to urge the Government to reconsider the test methodology for wraps, improve transparency and to address the immediate issue of providing tax relief for consumers having to exit products which haven’t met their performance benchmark.