Industry funds to refer ad criticism to ASIC

The dispute over the industry fund sector’s super choice advertisements has taken another explosive turn, with the union-backed funds threatening to refer an analysis questioning the validity of claims made in the ads to the corporate regulator.

Chant West Financial Services principal Warren Chant released a statement recently suggesting the “net benefit to members” figures contained in the industry fund television commercials might be misleading.

Industry Funds Services chair Garry Weaven immediately responded, questioning the Chant West analysis and claiming it “appears to be deliberately misleading and accordingly will be referred to ASIC”.

The Chant West analysis said that asset allocations rather than fees have been the main differentiator between industry superannuation funds and retail master trusts over recent years, and that the claims being used by industry funds based on “net benefit to members” could mislead members of retail master trusts.

Chant said that while industry funds could justifiably claim an advantage, in the real world the magnitude of the advantage was much less than was being portrayed in their choice of superannuation fund advertisements.

He said that in circumstances where members of large and medium-sized employer plans paid no adviser commissions, industry superannuation funds could claim little advantage over medium-size plans and would have to acknowledge being at a disadvantage to large employer plans.

Chant said there also needed to be further debate over the status of adviser commissions.

“There is considerable debate about whether adviser commission is really a distribution fee or a fee for advice,” he said. “If it is an advice fee, it is clearly unfair to include it in the net benefit calculation.”

Late last week, Chant responded directly to Weaven in a letter which said the “net benefit advertisements exaggerate the case for industry funds…when there is no need for you to do so”.

“Industry funds already have a good story to tell,” Chant wrote.

“Your approach is aggressive and has the effect of misleading a significant part of the market.”

He added: “We sent our press release to ASIC long before you did because we want them to stop IFS from issuing exaggerated, selective advertisements that could mislead consumers.”