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Investors are pulling their super from Cbus as advisers turn against the industry fund

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27 November 2024 by James Kirby, The Australian

Article link: https://www.theaustralian.com.au/business/wealth/investors-are-pulling-their-super-from-cbus-as-advisers-turn-against-the-industry-fund/news-story/66eaabcf6724d8c9ba2639941e2b5502

The Cbus-led string of scandals at industry super funds is starting to hurt where it matters.

Investors are switching money out as the self-managed super funds sector rebounds.

New data from the Adviser Ratings group, which monitors investment flows linked with financial advisers, shows elevated net outflows from Cbus following a horror period for the fund whereby regulators launched multiple actions against it.

Cbus has experienced a clear escalation of net outflows from adviser-led investors since July.

In November it had the largest net outflow of any major industry fund at $164m – or about triple the monthly volume it had in the month of July.

ASIC announced on November 12 its legal action against the fund, alleging delayed payments of death and disability benefits.

Net outflows from advisers ($M)
Fund
July 2024
August 2024
September 2024
October 2024
November 2024
 
HESTA

45
48
57
60
66
 
REST
48
33
42
60
42
 
CBus
54
69
87
102
164
 
ART
75
117
117
147
85
 
Hostplus
63
33
39
96
81
 
AustralianSuper
159
138
174
174
150
 
UniSuper
21
48
45
15
33
 
AwareSuper
105
60
81
126
52

 

According to Angus Woods of Adviser Ratings: “The data snapshot shows advisers are willingly moving an elevated level of funds out of Cbus.

“Looking at our data from ProductRex, which covers almost 6000 advisers, we can build a significant sample here. It’s clear advisers recommend clients potentially switch, but clients are approaching advisers on the issue as well.”

With an ASIC court case looming over the death and disability payment delays, Cbus has continued to accumulate negative publicity and Wayne Swan continues to be a focus of the fund’s problems.

Swan – who is both chair of Cbus and national president of the ALP – finally agreed to appear before a Senate committee examining super earlier this week, but only after risking being found in contempt of parliament for holding out.

The Australian on Wednesday reported that Cbus gave a grieving father the run-around for a year before paying out his son’s death benefit and is still refusing to disclose to him key information about what the payment comprised.

Controversies at Cbus also include investigations from prudential regulator APRA into both “questionable expenses” and issues relating to the appointment of new directors and their links to the CFMEU.

Meanwhile, the SMSF sector – which had struggled in recent years as industry super funds brought in strong returns – is rebuilding momentum.

The latest ATO September quarter data shows the sector has topped the $1 trillion in assets for the first time.

Money flowing out from industry funds – especially when directed by financial advisers – is most commonly on its way to newly formed SMSFs.

The SMSF sector also received a reprieve this week after the federal government decided to effectively drop the current push to have a new $3m super tax – that attempt to place an extra 15 per cent tax on wealthy super investors is now expected to be pushed out until after the next election.

The issues at Cbus have already triggered a critical report from international ratings group Morningstar which downgraded its “parent view” of Cbus from average to below average.

“Our concerns extend to the appropriateness of union affiliates sitting on Cbus investment committees,” the Morningstar report said.

“This outweighs positive steps Cbus had made to translate its growing scale into lower investment fees.”

Sitting alongside the Cbus incidents there has been a glut of recent failings inside so-called “big super” covering everything from IT failures to unlisted valuations at funds as diverse as ART, Australian Super, Hesta and Unisuper.

Though the adviser-led outflows for other top industry funds are broadly steady to date, the latest run of incidents spells a mounting crisis for industry funds.

Chatrooms and investor forums such as our podcast at themoneypuzzle@theaustralian.com.au continue to be peppered with complaints about industry funds behaving badly.

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