The current Parliamentary Joint Committee (PJC) on Corporations and Financial Services has been busy this week needling ASIC about all manner of things. It has revealed that ASIC will be looking at the fairness of advice fees across the superannuation industry. This was followed by a call from the Association of Superannuation Funds of Australia (ASFA) for a comprehensive audit of regulators including ASIC, APRA and the ATO to make sure they are doing their jobs “properly and efficiently”.
During questioning by the PJC, ASIC commissioner, Danielle Press told the committee that the regulator was looking at the fees issue alongside insurance inside superannuation, including claims handling. ASIC will be looking at disclosure costs and fees deducted from superannuation fund member balances and whether they are actually fair and appropriate. Press said, “We're looking at advice in superannuation, in particular around where fees are deducted from superannuation funds and whether or not they are reasonable, and whether or not the services are actually being delivered for those fees,” she said
Back At You - Levies Questioned
Almost simultaneously, the Association of Superannuation Funds of Australia (ASFA) tabled a submission calling for an audit of ASIC, APRA and the ATO by the Australian National Audit Office (ANAO) to make sure they are efficient and accountable – especially in light of the levies they collect from industry to perform their tasks.
The ASFA submission highlighted that superannuation funds will pay over $89.1 million this year in supervisory levies, up from $6.8 million last year. It wants to know whether the industry is getting value for money.The submission also pointed out what it said was a “moral hazard” faced by the regulatory agencies being funded by levies;
“The most significant aspect of agencies being funded primarily by levies is that it represents a form of moral hazard, in that the agencies have a vested interest in increasing the levies with relatively little accountability while the parties providing the funding (industry) have no control over the resourcing decisions made by the agencies. This extends to the type, and in particular the scope, of activities engaged in by the agency and the quantum, and nature, of the resources used.”
ASFA said “it is critical to ensure that superannuation funds only pay levies with respect to consumer protection within superannuation and not with respect to other wealth management sectors, such as managed investments and financial advisers, because neither as neither self-managed super funds nor financial advisers pay levies”. It continued… “it is important to distinguish activities undertaken with respect to these as they should not be funded by levies paid by regulated superannuation funds”.
So – just to confirm; at the same time ASIC is saying it would be looking into whether fees charged in relation to super funds were fair and appropriate, the AFSA was encouraging an audit of the regulators to make sure the costs incurred are justifiable, reasonable and transparent.
It would seem that there may be a bit of standoff at 20 paces from different super industry stakeholders – using the weapon of choice in modern business – the bureaucratic audit/assessment.
Modern business.
To finish of this Super tale, it is worth noting that Stockspot has just released its Fat Cat Funds Report 2019 Report which analysed 600 of the largest super funds to find the best and worst super funds in Australia. It has once again found that fees make all the difference when it comes to Australian retirement savings. The funds were assessed on how they performed, after fees, compared to other super options of similar risk over 5 years.
Top performing super funds came from Q Super, UniSuper and AustralianSuper, with Stockspot naming funds from ANZ/Onepath, AMP and Perpetual and the worst “Fat Cat” funds in the country.
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Comments4
"Hey ASIC, while you're looking the 'so-called fairness' of "disclosure costs and fees deducted from superannuation fund member balances and whether they are actually fair and appropriate, can I also suggest you also consider the additional workload you've created with your wretched Best Interest Duty requirements, increase in costs for PI Insurance, your unfair 'funding levy', the additional TPB fees at the same time. ASIC, the Government and Kenneth Hayne seem all too happy to cut back on the remuneration the advisers earn these days but continually fail TO EVER look at the other side of the ledger - what we do now and what we have to pay out each month in order to earn that income. If 'fairness' is what you're after, then practice what you preach. "
W 14:17 on 20 Sep 19
"Oh no.. yet another review designed to create yet another layer of red tape to an industry that is already overloaded. "
George 14:15 on 20 Sep 19
"So its all about fees. No mention of appropriate asset mixes, client understanding or whether it is a tailor made fund with ongoing advice, or the box-of-cornflakes offerings where four million members get exactly the same thing, regardless of their individual requirements. If fees are the benchmark, then we will all be in cash funds because the fee is negligible, and the returns are equally crap. At the other end of the scale, I also use a fund for SOME clients that has returned 17-plus percent last year, has a three year running average of over 24 % and fourteen year running average of 13.5 % . .yet the fee is over 3.25 % per annum. On their own, both are wonderfully useful and equally dangerous, yet as part of a carefully constructed portfolio both may well have a place. By all means, keep focussing on fees and disregard the benefit of paying for something that will prove of long term benefit to clients. We must be the only industry in the world were the official mantra is "cheap is good, even cheaper is even better". Its a ridiculous argument in my opinion. Start focussing on the quality of advice, something that can be easily measured when looking back over the longer term. You cannot manipulate the past results, you can only stuff up the future ones by looking at the wrong benchmarks."
CTH 14:13 on 20 Sep 19
"ASFA, representing the multi-trillion dollar super industry trying to weasel out of paying their fair share. Maybe financial advisers should just pay for everything."
Brent 14:05 on 20 Sep 19