Industry funds v Retail – real or just noise?

Forget the noise around the industry versus retail fund debate, the two sectors have been collaborating extensively in recent years, according to the industry funds body, the Australian Institute of Superannuation Trustees (AIST).

In a submission to the Productivity Commission inquiry into Superannuation Competitive and Efficiency, AIST chief executive, Eva Scheerlinck pointed to the Insurance inside Super Working Group (ISWG) and other policy developments as a measure of that collaboration which had been “overshadowed by areas of disagreement”.

“There has been extensive collaboration between retail and profit-to-member superannuation funds in recent years that has tended to be overshadowed by areas of disagreement,” she said in the submission and noted work on Stronger Super, MySuper and SuperStream as well as the establishment of the Superannuation Transaction Network.

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“However, working together on a cross-industry code of practice is a new development, and one that we believe the Commission should applaud,” the AIST submission said.

“Furthermore, the ISWG processes have involved, and will continue to involve, a commitment to

deep and transformative change on the part of individual funds,” it said. “The changes that will be brought about by the Code were developed in large part by funds and insurers working closely together, and their significance should not be underestimated. This has involved a significant cost, time and expert investment by funds, and included compromises by industry participants.”

The submission said that while the focus of super funds and their industry associations was on firstly, their statement of intent to adopt the Code, and secondly, the initial transition process, the industry associations had also commenced the process of considering next steps.

“The Code owners have been meeting regularly. AIST and [Association of Superannuation Funds of Australia] ASFA are planning to meet on Monday, 16 April to discuss the scope of work, and consequent prioritisation and timetabling for further development of the Code and are hopeful that the [Financial Services Council] FSC will also attend,” the submission said.

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From a financial planner's point of view, the "industry funds vs retail funds" debate has been a debacle from the start. The debate - or argument - has predominantly been led by institutions on the basis of individual bias.

The average public domain commentary is issued from these supporters at the extreme ends of opinion, leading to a dumbed-down "Morton's Fork" discussion that simply exacerbates tensions and misunderstanding. In the industry-vs-retail debate, you are not allowed to adopt an agnostic approach - you have to be seen to express an opinion of the Bush-style "for us or ag'in us". Yet industry and retail funds are just two of a large range of options available to a super fund member. Each has its pro's and con's.

This ridiculous industry-vs-retail charade is paraded as a debate. It's not a debate at all, it's a sledging match. And advisers have had to be the piggy-in-the-middle of that match. I think that is changing.

Industry funds have, on average, done a great job of stewarding member funds. Retail funds have, on average, done a great job of offering choice under a nominated adviser model.

A good deal of the "debate" has really just been noise, as proponents of one or the other make grandiose announcements about this or that making the "average" member better off. As usual, the reality sits deep within the shades of grey.

For a Friday morning cup of joy, take a moment to read the FASEA draft Code of Ethics for financial advisers, Standard 2:

"A relevant provider must neither advise, refer, nor act in any other manner, where inappropriate personal advantage is derived by the relevant provider."

I think this little clause would be a 'Sleeper' that holds far more potency than first readings would suggest. I hope that it will lead to the removal of some of the latent bias that forces advisers to cater to their particular AFSL affiliations. Eventually..

Unfortunately, some advisers have chosen to "take sides" in this argument. Current and proposed legislation and industry change will alter this over time, until it is seen the way it should be - competing business models available for advisers to discuss and recommend with clients - much like the discussion of SMSF vs Retail vs Industry vs Employer vs What-have-you. Until that time, the obfuscation and fallacious arguments will continue to swamp clients/members.

Good points

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