Investment managers face further fee scrutiny

Fees and their correlation to net superannuation fund returns will come under further scrutiny as a result of the terms of reference handed to the Productivity Commission (PC) covering the third tranche of its review of the efficiency and competitiveness of the superannuation system.

The terms of reference, released by the Federal Treasurer, Scott Morrison, is considered likely to further sharpen the focus of superannuation trustees on the fees they are paying fund managers.

Releasing the terms of reference, Morrison said the PC would be asked to focus on assessing system-wide long-term net returns, including by reference to particular segments.

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He said that through this assessment process, the commission should have particular regard to whether disclosure practices were resulting in a consistent and comparable basis for meaningful comparisons to be made between products and whether additional disclosure would improve outcomes for members.

As well, the terms of reference ask that the PC determine whether the system is minimising costs and fees (including, but not limited to exit fees) for given returns and what impact costs and fees have on members with low account balances, and what actions could be undertaken – whether by funds or policy changes – to ensure that these balances are not eroded needlessly.

It also asks whether the tailoring of costs and fees for different member segments would be appropriate.

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