Young Aussies urged to be wary of any super switch that quietly erodes savings, as data shows $1.1 billion spike in advice fees

Super Members Council

A sudden $1.1 billion surge over the last two years in advice fees deducted from Australians’ super accounts aligns with a sharp spike in recent super switching, raising fresh concerns about switching incentive effects, advice fee levels, and super erosion risks for younger Australians in parts of the super system with weaker oversights.

And younger Australians who switch into an SMSF face even bigger costs which can erode their super at a key life stage – which can make them significantly poorer now and in retirement.

For someone with less than $100,000 in super, SMSF operating costs are between 18-40 times higher than if they stay in a MySuper product in an APRA-regulated super fund - and the costs only become broadly comparable at super balances approaching $2 million, new Super Members Council analysis finds,

“The switching risks can be very significant for younger Australians with a modest amount of super, because higher fees can seriously eat away at their retirement savings at a pivotal stage for their super,” said Super Members Council CEO Misha Schubert.

The detailed new analysis of APRA and ATO data features in the council’s submission to the Government’s consultation on a raft of consumer protection reforms following the Shield and First Guardian collapses.

It shows total advice fees deducted from Australians’ super accounts suddenly spiked in the last two years — and just five super platforms accounted for $815 million of the sudden $1.1 billion fee surge from 2023 and 2025.

The growth rate in advice fees nearly tripled in pace in this period, highlighting an urgent need for stronger consumer protections including more universally robust trustee oversights, clearer fee transparency, and global advice fee caps to ensure all fees deducted from Australians’ super are always reasonable and proportionate.

Many of the Australians now being switched into these products are those least able to absorb higher costs — younger Australians with low and modest amounts of super who are still building their retirement savings.

Across SMSFs and super platforms, the majority of more recent super switchers had super balances below $100,000 or $200,000 – a stark departure from the long-term profile of older, wealthier investors for whom these types of more complex super products are typically designed.

Financial advice fees being able to be deducted from super is important to ensure Australians can access advice, but it is also crucial that the advice fees deducted are reasonable and proportionate in every instance - and that consumers are protected by rigorous trustee oversight of fee deductions that is universally high.

Great advice can make a big difference to people's financial wellbeing. But not all trustees appear to have the same stringent controls on advice fee deductions. This creates a serious structural gap in consumer protections.

The council’s analysis of SMSFs highlights further risks, with many low-balance Australians moving into structures with significantly higher costs and weaker long-term returns compared to APRA-regulated funds.

• Australians with super balances under $100,000 face average total SMSF expenses of nearly 12% a year, versus costs of under 0.5% in profit-to-member funds.
• Over the past decade, SMSFs with $100,000 or less delivered average annual investment returns of -9.5%, compared to +7.0% for profit-to-member funds — a performance gap of over 16 percentage points.
• For people with modest super balances, the combination of much lower investment returns and higher fees can significantly erode their super and retirement financial outlook - compared to being in high-return, low-fee, regulated mainstream super fund.

The council calls for urgent reforms to strengthen consumer protections across the super system, including:

• Stronger caps and universally robust oversights on advice fee deductions
• Stronger transparency and reporting of fees across all products
• Warning mechanisms and minimum balance thresholds for SMSFs
• Faster implementation of Delivering Better Financial Outcomes (DBFO) reforms

More robust consumer protections are backed by consumer research conducted for the Council by Pyxis. It found an overwhelming majority (79%) of Australians support clear fee caps and want much clearer information on the level of fees they are being charged for advice.

Stronger consumer protections are crucial to ensure Australians are better protected from being switched into a super product where their super is eaten away by higher fees which make them worse off in retirement.

“Great advice plays a really important role in helping Australians build their retirement savings — but it’s also crucial that every advice fee deducted is always reasonable and proportionate – and that the oversights are universally high to ensure that is the case,” Ms Schubert said.

Almost 12,000 Australians lost more than $1 billion of their life savings in the Shield and First Guardian collapses, and comprehensive safety reforms are urgently needed to avoid future consumer disasters.