Some trustee directors of bank and institutionally-owned superannuation funds are conflicted by tied investment and insurance arrangements and should resign, according to one of the longest-serving members of the Superannuation Complaints Tribunal (SCT), Noel Davis.
He has also suggested that such conflicts also bring into question the advice fees deducted from member accounts, particularly if the superannuation fund members had never met with the adviser in question.
Davis, who resigned his position with the SCT this month, has reinforced some of the issues raised during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by suggesting that when the directors of a superannuation fund are also the employees of the bank or institution running the fund “they have a hopeless conflict of interest”.
Discussing matters that came before the SCT, Davis said that for superannuation funds conducted by the financial institutions, the making of submissions [to the SCT] was “often confused in that submissions by the trustee are frequently made by a company in the group of companies and not by the trustee itself”.
“That is a consequence of these very confusing corporate arrangements where membership of the superannuation fund and of life and disability insurance to go with it is sold by the financial institution either directly to a person or through an employer’s superannuation arrangement.”
Davis said it was apparent from submissions to the SCT that it was frequently the case that even employees of the financial institution were confused about what the role is of each company in these convoluted arrangements.
“The members are of course even more confused by them,” he said.
“Some of the directors of the trustee in these arrangements are invariably also employees of the financial institution. They, of course, have a hopeless conflict of interest because of their duties to the employer and their duties as directors of the trustee in ensuring that the related investments and insurance arrangements are the best that can be done for the members.”
Davis said the so-called independent directors of these trustees were sometimes former employees of the financial institution or were advisers or former advisers to the trustee and were not, therefore, independent.