INDUSTRY reporting standards fall short in providing fair comparisons in the area of superannuation funds, according to Chant West Financial Services director, Warren Chant.
Chant’s comments came as part of his presentation at the Investment and Financial Services Association (IFSA) conference where he said that IFSA standard 6S made it difficult to compare the performance and returns of corporate, industry and public offer superannuation funds.
The reason for this, according to Chant, is the reporting standard requires a deduction of fees, but this is usually at the maximum level, and since not everyone is charged fees at this level the end results are incorrect.
“Scale in many cases drives fees down so it is wrong to deduct full fee figures on many superannuation funds,” Chant says.
He also says that flat member fees, while simple to administer, are not being deducted from performance figures and thus would differ when compared with corporate master trusts.
This is an important issue, he says, since there are 12 million people involved with retail master trusts, 1.4 million in corporate super and seven million people involved with industry funds.
“Clearly there is a large group of people affected. Retail investors cannot compare fairly between the public offer funds and industry funds,” he says.
Another problem with reporting fees and performance figures is that most corporate and industry funds compare their returns with Mercer or Intech reports and surveys with a wholesale focus.
“Members see wholesale performance figures, but then pick up the retail media and see a different set of figures. Master trusts are not compared with those surveys, but they should be as performance of each of them is nothing without relativity,” Chant says.
He went on to say the costs of member protection in many funds is taken from returns, which is a hidden cost in those funds and in some cases even comes from earnings, which is also not disclosed.
“A better model that should be adopted across the board is not to deduct costs, including fees, before performance, which would allow for a full comparison of fees and performance figures,” he says.
