Industry super funds are not looking for a fight and would rather spend this coming year working through how superannuation can be used to improve the personal and collective economic situation of all superannuation funds members according to Industry Super Australia (ISA) chief executive David Whiteley.
He is very aware that many in the retail superannuation sector, including financial planners and advisers, will disagree with this statement but he maintains that industry super funds did not attempt to alter the Future of Financial Advice (FOFA) legislation and are not looking for change to the default super funds system either.
Rather, Whiteley claims, it is the banks – with their stakes in retail superannuation – which have agitated for change in the sector and are likely to do so throughout 2015 instead of helping to shape the retirement income system growing from the compulsory superannuation system.
"Our preference would be that as an industry we would spend the next year or more to make sure that tax concessions in super are sustainable, fair and equitable and are considered by governments in line with the outcomes of intergenerational reports. To achieve that government, opposition and the super industry need to reach consensus and that would be worthwhile thing to do," Whiteley said.
"The sector could also look at retirement income stream design and how superannuation can become a driver of economic and productivity growth. This would benefit members and create stability while also rehabilitating the financial services sector by being instructive and participating in the real economy."
"However we will probably spend time debating the default funds regime and if we do that it will not be because of industry funds."
Whiteley bases this comment on the back and forth lobbying that took place around the FOFA, to which he admits ISA was vocal in defending in its original form, stating it was for good public policy reasons.
"We have an advice industry and everyone wants it to act in the best interest of members and no-one disagrees with that. Yet in a compulsory superannuation environment the presence of commissions are a weakness in the system and these were introduced into the FOFA amendments as the result of bank lobbying."
"During the last year or so the superannuation industry, and the broader community, were being made aware of and discussing the financial advice industry, and this was mainly in context of the banks and bank-owned superannuation funds. However they were lobbying to dilute the FOFA reforms and are still lobbying to change the governance of industry funds and to remove the default fund safety net."
He rejects the notion that industry funds would be naturally opposed to any change suggested by the banks claiming the Murray Inquiry, the Ripoll Report and the Parliamentary Joint Committee have also proposed the retention of the status quo.
"The Murray Inquiry has made a number of recommendations including leaving the FOFA regime for five years and not altering the default super system, as have a number of other reviews in the past five years, and they have all said Australia needs a default system as the majority of people are not choosing their own super fund."
"The only people opposing that are bank owned super funds, who are also opposing the governance of industry super funds and if there is to be a further politicisation of super it will not be because of the industry funds sector."
Despite this view Whiteley said ISA is not opposed to advice or even vertically integrated models of advice claiming a diverse advice sector was required as long as the economies of scale did not eliminate smaller providers.
He said ISA was not opposed to the grandfathering elements of FOFA and has never been in the vanguard of groups calling for the end of vertical integration but believes if the FOFA amendments are raised again and passed by Federal Parliament questions will be asked around advice models and ownership.
"We have all been working with the idea that the banks and their advice channels would be so brand proud and would have the best systems and the most trusted advisers that the events of 2014 have led to many people questioning those assumptions," he said.
"If the FOFA amendments are pass through some time this year the issue of vertical integration may become active again so in a way the bank owned groups may have dodged a bullet on this issue."
But Whiteley maintains advice will also not be a one-way street with industry funds providing general and personal advice services to members based on their demand for retirement planning.
"The question around advice and other services comes down to what extent do people want to be engaged, particularly for retirement which may be many years away."
"We have the ability to provide services at scale but have to make the judgement about how to engage people given their connection to superannuation is often unpredictable."
"At the same time we have a cohort of members who may need advice and these services cost money, and that is a function of market opportunities, but we will provide them and will do so in the best interest of those members."
