Banks should be subject to a "better off" test when cross-selling superannuation with other bank products, according to Industry Super Australia (ISA).
In the same week as the major banks have reported solid profit increases, the ISA raised questions about whether the banking institutions were capable of appropriately balancing the interests of shareholders and consumers.
The ISA has acknowledged the need for a strong, stable, and healthy banking system but has questioned whether the banks themselves were meeting community expectations and has directly referenced the cross-selling of products such as superannuation.
"When a consumer walks into a bank, they should be confident that their needs and circumstances are being taken into account and they should leave better off," the organisation said in a statement.
"Regrettably there is more than enough evidence to suggest that that this isn't always the case — with scandals and institutionalised mis-selling stretching back years."
"Further, there are concerns about the cross-selling of super to bank customers and the bundling of superannuation with discounted mortgages or bank accounts," the ISA said.
"The cross-selling or up-selling of super should be subject to a ‘better off' test. That is, the bank must ensure that the customer is better off than in their current super arrangements."
The ISA claimed it was instructive that there was no clarity as to how compulsory super services operated within the vertically integrated banks and suggested there were concerns about conflicts of interest, related party transactions and the impact on fund member's retirement savings.
"There is an obligation for a higher duty of care for superannuation because it is compulsory. Banks must meet this higher duty of care," the ISA claimed.
Amid a challenging market environment, three super fund CIOs have warned against ‘jumping at shadows’.
The professional body is calling for the annual performance test to transition to a two-metric test, so it better aligns with the overarching duty of super fund trustees to act in the best financial interests of their members.
AustralianSuper, Rest, and HESTA agree on the need to retain and enhance the test, yet they differ in their perspectives on the specific areas that warrant further refinement.
Australia’s second-largest super fund has confirmed it is expanding its presence in the UK following significant investment in the region.
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