11th Apr 2019
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Super watchdogs give industry deadline for clean-up
Author: Janelle Ward

How closely have you managed the administration of your super fund over the past decade or so? Could you have been charged fees for services you didn’t request?

Regulators have given the $2.7 trillion industry until 30 June to clean up the damaging and widespread practice revealed last year by the financial services royal commission – fees for no service.

The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) sent a letter to every superannuation trustee company in Australia this week, warning that the issues of compensation and governance needed to be resolved.

The letter, signed by APRA deputy chair Helen Rowell and ASIC commissioner Danielle Press, said the watchdogs had already “identified a range of industry practices in relation to trustee oversight, many of which fall below the standard we expect”, some of which were “the subject of enforcement investigations or actions”.

The letter continued: “This raises concerns about some trustees’ risk governance, capabilities and culture, as well as their ability to appropriately manage conflicts of interest.”

The regulators said they “reserve the right to exercise our powers in relation to any subsequent enforcement action required” and expected super trustees to pursue financial advisers who had inappropriately charged fund members.

The royal commission hearings exposed the likes of NAB, AMP and CBA, which had continued to charge dead people advice fees and clients for financial advice they never received.

Ms Rowell and Ms Press told trustees they “must have in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees and other charges are deducted from members’ superannuation accounts”.

“Accordingly, APRA and ASIC expect all trustees to be reviewing the robustness of their existing governance and assurance arrangements for fees charged to members’ superannuation accounts, and to address any identified areas for improvement in a timely manner.

“Should such reviews uncover any significant issues or deficiencies in the risk management systems and processes of trustees, our strong expectation is that trustees give urgent consideration as to whether a reportable breach has occurred and, if so, whether it has been escalated in a manner that will ensure appropriate remediation takes place.”

The letter said that reviews should consider:

  • whether fees had been “explicitly authorised by members”
  • whether services had actually been provided
  • whether the deductions were in the best interest of members
  • whether deductions were consistent with the “sole purpose test” contained in super law.

Earlier in the week, it was reported that CBA had repaid an additional $2.3 million to 232 clients of its worst financial advisers. The disclosures were made in the fifth and final instalment of a KordaMentha review of the CBA’s compensation processes as part of licence conditions imposed by the ASIC.

Would you know if you had been charged for services not delivered? Do you monitor the administration of your super account closely?

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    COMMENTS

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    MICK
    12th Apr 2019
    10:04am
    I've been watching the experts discuss this. Apparently Industry Funds get a clean bill of health and Retail Funds are the targets because of their predatory behaviour towards their customers.
    I can't wait for the trolls to try and tear down the unmistakable track record. Some things in life never change.
    Old Geezer
    12th Apr 2019
    4:02pm
    I wouldn't have super in either industry or retail funds.
    danielboonjp
    12th Apr 2019
    10:22am
    I am still waiting for the UNETHICAL Australian Ethical Fund to return the life insurance premium/s they took from my final payout; the Ethical Fund Trustees have a death grip on my money, despite them telling me prior to my 65th birthday, I could no longer get insurance with them
    MICK
    12th Apr 2019
    11:05am
    Submit a complaint to the Ombudsman. Given we've just been through a Royal Commission I suggest you may get a result as long as your issue was not decades ago. Good luck.
    pedro the swift
    12th Apr 2019
    11:06am
    The Australian Ethical Fund being unethical? Thats worth a laugh! i certainly would not deal with a fund calling itself "ethical". would raise a red flag straight away.
    Old Geezer
    12th Apr 2019
    4:07pm
    Yes it's one the funds I have had dealings with over the years. Now not sure myself what ethical actually means.
    Old Man
    12th Apr 2019
    11:58am
    We missed an appointment with our super fund for the annual review and got a substantial refund which, I have no doubt, was because of the Royal Commission. I wrote to them asking if there would be no charge or a refund in the event that I didn't want an annual review. Three 'phone calls later, I insisted that they reply in writing as I had taken the time to write to them. It eventually arrived and after reading and re-reading it, I'm sure that the legal department had a say in the final draft.

    The result is that we will be charged but if we don't wish to use the annual review then a refund will be made. Our reason for not wanting a review is that we are in a safe option and can access all of the details that we are told of at a review online. We both have an understanding of finance, are happy with our choice of investment option and can see no need for a review. It's not for all but it suits us and thanks to the Royal Commission.
    Mondo
    12th Apr 2019
    2:29pm
    Well Mick, here's one for you! I wrote to my wife's industry super fund about an annual service fee that she had been regularly charged. They had always refused to drop it even though she didn't receive the "advisory service" they claimed to provide. But when I wrote to them at the beginning of the Royal Commission mentioning the way these fees had been attacked, they immediately sent a cheque for over $12,000. This proves it was a try-on by an industry fund, until a big stick was wielded.
    Why anyone would pay for financial advice from many of these outfits that have trouble running themselves I can't imagine. AMP shares have fallen from over $20 to just a few dollars due simply to poor management. Why would you want them managing your money?
    My suggestion is if you have any doubts, write a letter, not an email to your fund and ask for any refund entitlements. You might strike lucky first time but if you don't get any joy you have two pieces of paper to start your claim via the Ombudsman.
    ardnher
    12th Apr 2019
    2:45pm
    wrote to Commonwealth bank before the findings of the Royal Commission were handed down asking for a refund of fees paid for service never received. still waiting on a reply from them. now that they have until 30 june I will be onto them like a seagull onto a hot chip if I have received no correspondence by then.
    Mondo
    12th Apr 2019
    3:41pm
    ardnher. Good on you but I wouldn't wait that long. Put it this way, if you owed the Commonwealth Bank money how long would they wait for you to reply? Is there no chance you could transfer to an industry fund? You might get a refund from the Bank but their fees will always be higher and financial performance lower than most 'not for profits.'
    ardnher
    12th Apr 2019
    6:11pm
    I transferred to an industry fund quite some years ago but I am wanting back payment for the years of being with the CBA.
    SFR
    12th Apr 2019
    4:26pm
    Industry funds came out way way a ahead of the greedy corrupt retail funds.
    More than happy with the performance of my Industry fund income stream. Low fees all up front & no hidden fees or extras etc.
    Glad I cashed in most of my shares and diversified, and no FC's to worry about..
    GeorgeM
    12th Apr 2019
    7:50pm
    Janelle, regarding the comment "Regulators have given the $2.7 trillion industry until 30 June to clean up ...." - could you kindly confirm the year for this deadline should be 2019?
    GeorgeM
    12th Apr 2019
    7:57pm
    Regarding the comment in the APRA / ASIC letter ".....as well as their ability to appropriately manage conflicts of interest." - as long as large Bonuses on top of large salary packages including massive share options remain, the Greed factor and hence conflicts of interest will remain, and APRA / ASIC are going to achieve very little as time goes by and people's memory of the RC fades. Maybe there should a further review after 12 months on what APRA & ASIC have achieved - hope political parties are listening.


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