Have retail funds learned nothing from Royal Commission?

Industry superannuation funds are claiming their retail superannuation fund counterparts appear to have learned little from the Royal Commission in circumstances where some bank and insurance company owned super funds are charging almost twice as much in fees.

The Australian Institute of Superannuation Trustees (AIST) has pointed to research it has commissioned from specialist ratings house SuperRatings comparing fees charged by retail superannuation funds to fees charged by profit to member industry funds.

It said the typical annual fee paid by someone with a $50,000 super balance in a High Growth investment option offered by a retail fund was $942 and that this compared to an average $591 in fees charged by a profit-to-member fund for the same product.

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The AIST said the difference was even more stark for those wanting to put their superannuation into more defensive investment products, such as people approaching retirement.

It said the SuperRatings research had found that a person with a balance of $250,000 in a mostly cash invested ‘Secure’ option in a retail fund would be paying on average $3,255 per annum, or 274 per cent more for the same product in a profit-to-member fund.

The AIST pointed to the fact that as account balances increased, the fees for the profit-to-member sector became even more competitive, given the lower overall asset-based fees charged.

Commenting on the outcome, AIST chief executive,  Eva Scheerlinck said the report highlighted the need for regulators to provide tools that made it easy for members to compare fees and charges and make informed decisions about which super products were best for them.

“Currently, it is almost impossible for members of Choice funds to compare the fees and charges of their super fund. In the 21st century, this shouldn’t be that hard,” she said.

“Many members are paying almost double the fees for less returns on their retirement savings. It’s hard to see how the trustees of these funds can justify this in the post-Royal Commission environment.”

“People in low performing funds will be losing out on their superannuation and they won’t even know it. This is unacceptable.”

In terms of returns, the SuperRatings data showed that median profit-to-member MySuper funds delivered 6.47 per cent over the past three years to 31 December 2018, well above the 4.94 per cent achieved by the for-profit retail super funds.

The research noted the fact that historical comparisons between fees are harder now, given that the introduction of new fee and cost disclosure laws has changed the way funds disclose their fees.

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Where do they get these figures? they're saying that the average person in a retail fund is paying a fee of 1.88% for a high growth multi-manager option and 1.3% for Conservative option. It's just ridiculous. Maybe 15 years ago when inbuilt trails were still bundled up in the MER but not now, most modern retail/wholesale platforms are as cheap if not cheaper than industry funds and if you want to go with index options then they are considerably cheaper. Would love to see some accurate data being used for a change.

It's probably the same deliberately misleading trick they use with their advertising. They define their universe of comparable funds in a way that excludes all the low cost retail funds that have emerged in the last 10 or so years. They only compare themselves to the old higher cost retail funds, which are mostly closed to new members.

This trick reflects very badly on Super Ratings who must be totally aware of how their data is being misused to deceive the public, yet are very happy to take the union super money nonetheless. With Super Ratings takeover of Lonsec one wonders how much pressure is being placed on the once independent Lonsec researchers to look more favourably on union super fund deceptions, particularly their creative asset allocation classifications.

Recently a HESTA member approached me to explain the fees on her statement.
She had been a member of HESTA since 1989.
Her account balance was approx $225,000.
She had never been personally contacted by a HESTA representative or adviser for 30 years.
The only contact during this time was the receipt of her statements.
She was recently considering retirement and requested contact from a HESTA representative.
She had recently turned age 60.
The HESTA representative informed her that she needed to carefully consider the taxation implications of retirement as the Taxable component of her benefit would be reduced as a result of taxation at 17%..........she was already 60 years of age and her retirement benefit was tax free !
The only advice she had ever requested and received over the phone was incorrect.
Fees on her latest statement:
Fees directly deducted from your account: $609.09
Indirect costs of your investment: $481.12
Other fees of your investment: $1485.21
Property Operating Costs definition:
" Property operating costs are a transactional and operational cost that relates to property investments and includes costs in the ongoing management of a property. For example, land tax, repairs and maintenance, management fees, insurance LANDSCAPING, leasing expenses.
These costs are an ADDITIONAL cost to members."
Her Binding Nomination of Beneficiary was to all 3 adult children and not to her spouse.
It had never been reviewed by a HESTA representative.
It was explained that in the event of her death her 3 children may have to forgo approx $25,000 in Tax as they were
Non-Tax Dependents and if she were to consider altering this nomination to her current spouse, there would be no tax payable in the event of her death.
The interesting detail contained within her statement refers to " the cost of providing advice to HESTA members is included in the administration Fee".
Although there are additional advice fees charged if members seek to engage a HESTA financial planner for more complex advice, but appears there is a component allowed for general intra-fund advice within the Administration Fee that is not identified.
It is included within the administration or operation costs and as such every member pays it whether they receive intra fund advice or not.
It would appear this member has been paying this component to cover the cost of intra-fund advice for 30 years and until very recently only accessed it once and received inaccurate advice.
Would Eva Scheerlinck wish to make a comment to Money Management in relation to real world comparisons and not the 274% more for retail funds as claimed ?
When all said and done, industry funds are run only for the benefit of their members Eva!...isn't that right ?

Great example of why "intra fund advice" is just a fee for no service scam.

"profit-to-member fund" …. when did this term become an synonym for Not for Profit? What "profit" are they returning to members? Are Funds attempting to maximise "profit"? If so how - fees higher than might otherwise be, lower paid staff?, Are some members subsidising the profit distribution of other members?
Do they advise members they invest in profit to shareholder entities to ensure ongoing returns for their members?

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