By that logic then, no area spell would effect an ally if they're caught in the zone, making my druid's "target creature" AoEs much more party friendly. I don't have to worry about sliding them, limiting their movement, or knocking them prone.DMG page 40, Legitimate Targets section, says that you cannot hit a target to gain an effect unless the target is a meaningful threat.
Unless your ally is dominated, you are probably breaking that rule if you use Hypnotism on them.
Even if used as intended, Hypnotism is really thematic for jedi-style enchanter wizards. It actually makes me want to play a wizard for the first time in years. So different from yet another attack with a push effect.
Underpowered though? The fact that it requires two attack rolls to do any damage - even if one is at +4 - makes me think that it might be a trap.