14.3 What the case study showed

14.3.1 Aon Hewitt

On the limited material I have, it may be that the advisers concerned may have breached each of sections 941B(1), 946A(1) and 961B of the Corporations Act on each occasion a switch was made, if the switch was made without the client’s informed consent, by, respectively, failing:

to provide an SOA;
to provide an FSG; and
to act in the best interests of the client.

Not having heard the advisers’ side of the story, I cannot, and do not, say whether that is so.

Each of the relevant obligations applies to the ‘providing entity’ or ‘provider’. Insofar as section 961B(1) of the Corporations Act is concerned, not consulting with a client at all, or merely informing a client of a chosen course without consulting with him or her could constitute a breach of the section.[1] But, as I say, I make no finding.

Instead, the question is whether Aon Hewitt itself may have breached these or other provisions of the financial services laws. In its submissions, it contended, by reference to the wording of each of section 941B(1), 946A(1) and 961B of the Corporations Act, that those provisions only apply to the ‘providing entity’ or ‘provider’ of the relevant advice and that it was not the providing entity or provider that was engaged in the conduct described here. I agree.

Nevertheless Aon Hewitt would be liable under the Corporations Act, sections 917A, 917B and 917F, to compensate the affected clients if the conduct of the three advisers was not lawful. Aon Hewitt was right to acknowledge that this is the case, and it is right to have committed itself to a program of compensation. The supervision of that compensation program is a matter for ASIC.

14.3.2 Mercer Superannuation

Mercer Superannuation conceded that the instructions recorded in the email – that Mercer Superannuation should not make it easy for members to find out about or access lower fees – was conduct that fell below community standards and expectations.[2] I agree.

Retail trustees often emphasise to regulators, the Commission and others, the importance of managing conflicts. But when it comes to superannuation, conflicts must not just be ‘managed’ – trustees have an overriding obligation to prefer the interests of beneficiaries. In these cases, financial advisers (in the case of Aon Hewitt) and the trustee (in the case of Mercer Superannuation) might not have done so.