30th Jul 2018
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Opinion: Royal Commission to shine a light on super

While Australia’s superannuation system is regarded as one of the best in the world, it may be in for a shock as the banking royal commission puts the $2.6 trillion industry under the microscope next week.

The battle between industry and retail funds seems to have been won by the former. But some big banks – those that own oft-maligned retail funds – which have been stung by the banking royal commission may now be quietly chuckling knowing that the spotlight is about to be shone on all super funds, including ‘squeaky clean’ industry funds.

Meanwhile, although big banks’ shift out of the wealth management sector has gained ground, Westpac has signalled that it’s still in it for the long haul. The bank has declared it will take a $70 million revenue hit to cut fees for customers on its BT Panorama Investments platform. While not one of the ‘Big Four’ but still a for-profit fund owner, AMP has also announced it will put aside $300 million to remediate poor advice given to customers.

Both these moves have been reactions to the royal commission, which has ripped into big banks and financial services for poor advice, corruption, excessive fees and other dodgy practices.

A report released earlier this month showed that Australians have forked out around $700 billion in fees to super funds.

While the Australian Superannuation Funds Association tried to come to super funds’ rescue, the sector’s fee structure remains less transparent.

The royal commission will likely shine a light on this and other areas of an industry that has so far escaped scrutiny because of its solid performance.

Although Financial Services Minister Kelly O’Dwyer was reluctant to hold a banking royal commission previously, her more recent comments about the investigation – both past and future – have become more pointed.

Speaking to the Financial Services Council last week, Ms O’Dwyer warned that the commission “could deliver some shocking stories about the super sector”, referring to the behaviour of the industry as well as the regulators.

She claims the royal commission is a chance for the industry to reflect on the behaviours that led to the probe. She also warned that the sector should now “draw a line in the sand” in regard to any questionable or underhanded practices, and to do what it takes to restore trust in the financial services and wealth management industry.

Ms O’Dwyer also relayed that the Government and the Australian Securities and Investments Commission will be “looking to firms to ensure they take all necessary action and play their part in restoring that trust”, including reviews of financial advice and fees charged.

If we’ve learnt anything from the royal commission so far, it’s that no stone has been left unturned in exposing poor practice and dodgy dealings in the financial services sector. It could be an ominous warning for the super industry which has so far not attracted the same attention.

One factor that worries many fund holders is who will bear the cost of compensation and remediation for funds found guilty of dodgy practices. Another is how the royal commission findings will affect stocks and investments.

Investors are now claiming that regulation is replacing disruption as a key theme to watch in the coming year. Airlie Funds Management Matt Williams said that the public’s desire to see change could affect the bottom lines of many companies in which these same people have investments.

Super funds may have to increase fees, or we may see softer returns as a result of regulatory risks.

Mr Williams referred to one of the Airlie Fund’s own holdings to illustrate his point: “They copped a regulatory decision on the rate of return they can get from their asset and it was way worse than what we were expecting. The stock suffered accordingly.”

Many fund members fear they’ll have to foot the bill to cover the cost of regulation. However, Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said that super funds were morally and legally obligated to ensure that members’ savings were not used to fund the resolution of complaints.

“It would be unacceptable, inequitable and unfair if members’ retirement savings were used to fund the resolution of disputes unrelated to superannuation, such as complaints against banks and financial advisers,” said Ms Scheerlinck.

The dominance of the big banks in the wake of the Global Financial Crisis has started to unravel thanks to the royal commission. Maybe the same will happen with the super industry. One thing’s for sure, the royal commission will be a shock to the system and one that will no doubt create some changes in the industry.

Are you happy with how the royal commission has operated? Will you benefit from the outcomes? Or are you worried that the cost of such action will end up coming out of your pocket?

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    COMMENTS

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    MICK
    30th Jul 2018
    9:25am
    where there is big money there is always big corruption.
    Who should cop the flack from crooked behaviour within superannuation funds? Simple. The CEOs and management teams who rule over this behaviour. That SHOULD include severe financial penalties for those who orchestrated the bad behaviour and/or benefited from it.
    I'm will to bet the well worn path will be followed: no action and the golden parachute. That's how the top end of town works. The mates club with mates looking after other (criminal) mates.
    TREBOR
    30th Jul 2018
    11:23am
    RICO springs to mind - proceeds of criminal activity - proceeds of organised criminal activity....

    Ten years minimum with no privileges and RICO all ill-gained assets.
    pedro the swift
    30th Jul 2018
    10:27am
    So the Royal Commission is going to look into Super, hey? Well, they "looked" into banks and not much was really turned up or made a big difference in practices. No big bank heads were punished in any way really and a few crumbs were thrown to the public to show they were doing something. Now lets see how they attack super specially the industry funds which the gov is so keen on getting under control .
    Mick , you are sure right about the mates club! Suggest everyone read GAME of MATES by Cameron K. Murray & Paul Frijters. Its a real eyeopener on how we are all being conned by our pollies and big business.
    fearlessfly
    30th Jul 2018
    10:41am
    Thanks for the tip Pedro the Swift, have followed that up and in the process of getting hold of it one way or another. Love reading this sort of expose book!
    MICK
    30th Jul 2018
    10:56am
    If you own shares I strongly suggest you go to an AGM where they set CEO remuneration.

    Institutional shareholders almost always vote for obscene pay increases because they have vested interests: this is a salary merrygoround where CEOs of companies which own shares in other companies get a flow on effect with the obscene salary coming to them as well.

    It's a fraudulent club and if we had a real government institutional shareholders would be barred from voting on pay issues. Under the current one we hear the 'free market' rhetoric and a steadfast refusal to stop the theft of shareholder wealth. Same deal in many other areas of our financial system. Crooks looking after crooks.
    Old Man
    30th Jul 2018
    11:08am
    You may be a tad premature, pedro the swift, I don't think that there was expected to be much happening until the final report and recommendations are issued. Sure, some heads have rolled and I think there may be a few more together with some changes to the banking and insurance industry once the Royal Commission has completed its work.
    Old Man
    30th Jul 2018
    11:14am
    Spot on, MICK. Just a few months ago there was a very interesting article in the press when the CEO of AMP resigned. It disclosed how many companies she was on the board of as well as a list of directors of multiple companies and how, in some cases, there was a perceived conflict of interest.

    Just adding to what pedro the swift raised, it has always amused me how some politicians who had the arse out of their pants before becoming an MP had the wherewithal to purchase multi million dollar homes. In some cases they were invited to become directors and even chairperson with little to no knowledge of the industry involved.
    Jim
    30th Jul 2018
    11:21am
    After so many good comments and justified criticism of the banks, out comes the rhetoric of our resident anti government voice, so just to clear things up a bit, it’s an atrocity that the banks have got away with their behaviour for so long, and during the time that they have been getting away with their behaviour we have had governments of all hues running the country since the 80’s when superannuation was introduced, in my opinion it was the best policy that was ever introduced for the benefit of the working man, the only problem is after many have already stated where there is huge ammounts of money corruption usually follows, that corruption isn’t only amongst the top end of town, that’s the reason we need a full investigation into the superannuation industry, including all funds.
    TREBOR
    30th Jul 2018
    11:21am
    Wasn't is something obscene like 127 people held virtually all 'board' positions, OM?

    Slowly the truth dawns on the many..... truly the worst enemy of the politician and the shady business dealer is the internet.,.....

    "One guarantee of a free society is a free exchange of information!" - JFK..... now you know why there was a highly professional hit on him.... nobody in the business believes it was a lone crazed gunman.
    fearlessfly
    30th Jul 2018
    7:41pm
    Managed to source that book Pedro the Swift, found it through the Interloan Library Service, from Darebin Library here in Vic. Looking forward to reading it now.
    fearlessfly
    30th Jul 2018
    10:43am
    Flaming Dipstick ! Thank god he's going to be out on his ass next year !
    LoLo
    30th Jul 2018
    10:51am
    Good on you Mick n Pedro, here the rich get richer while the poor get poorer, if only the CEOs could be made accountable for the money they rob off the poor, and the ministers made accountable for using our tax funds, the world would be a better place.
    Magic Touch
    30th Jul 2018
    11:39am
    LoLo, I am 100% agree with all of you only the CEO and the ministers should made accountable to pay back not the bank pass on to the customer by increasing charges on the bank fees and ministers start coming up with more taxes. We were see how god are going to punish this type of crook.
    Anonymous
    30th Jul 2018
    2:14pm
    Correction LoLo.
    The rich and the poor are getting richer
    The economy is doing well - 20+ years of growth under LnP
    record unemployment
    surplus budget on the horizon and labor debts will be repaid once again
    Hoohoo
    3rd Aug 2018
    4:18pm
    oldaid, haven't you heard about the stagnant wage growth that accompanies (& has probably created) the present 20% company profits?

    And how about under-employment & shitty, casual jobs with no sick pay or holiday pay, that make the unemployment figures look good?

    You're living in a 20th Century dreamworld. The ground rules have changed & our "democracy" is not keeping up, nor does it care.

    When or if the surplus budget arrives on the horizon, I wonder if they'll pay off the 66% of Liberal's debt before they pay off the 33% of Labor's debt? Or will we be still talking about Labor's debt NEXT century? We will be if these Liberal Government liars have their way!

    While we're on the subject, the Labor debt saved us from a recession during the GFC while the present government's debt has feathered the nests of the rich & powerful. I wish we could apply penalty rate cuts to CEO's salaries & bonuses.
    floss
    30th Jul 2018
    10:58am
    A Royal Commission should be set up on a continuous basis we have enough corruption to keep it going for many years.There is so much greed and corruption going on in Australia they would never be out of work.
    TREBOR
    30th Jul 2018
    11:17am
    Will AMP's #300m come from the hands of the shareholders and the execs etc, as is properly should - or will AMP just levy a fee on the peasants foolish enough to be invested in them?

    Will AMP be placing a 'please pay by due date - you forked it: you fix it' on its deceased execs who've 'scaped the lash by running like craven dogs the moment this hit the fan?

    How many millions were their golden handshakes?
    TREBOR
    30th Jul 2018
    11:25am
    I now await the Usual suspect apologists who will begin screeching that without all these wonderful firms there would be no employment.... you just can't train some people into the understanding that removing a corrupt firm leaves that field open to one that will abide by the rules and by common decency - or suffer.... and that is precisely why we have rules and not some bar-room brawl called 'unconstrained free enterprise governed exclusively by market forces'.
    Old Man
    30th Jul 2018
    11:40am
    It's all well and good to compare super funds but because of a lack of transparency, we don't know if the comparisons are before or after fees are deducted. I was staggered by the reported $700 Billion in super fees until I read the report which actually states that the figure is over 2 decades. Even so, this equates to an average of $2,800 for each worker in Australia per annum or $54 per week. The average weekly pay is $1628.10 and 9.5% of that is $154.66 so if we compare the percentage of fees to super we reach a staggering 34.92% taken out of super each week. The worker is being ripped off and I care not whether it is an industry or retail fund doing the rip off, it has to be made more transparent and more super being credited to those who earned it, not those who steal it.
    Rae
    30th Jul 2018
    2:21pm
    Even worse when you consider the self employed are not forced to have super so it's only PAYG workers being charged these obscene amounts.
    TREBOR
    30th Jul 2018
    2:27pm
    Good work!! Well calculated out.... and cannot but agree.
    Old Man
    30th Jul 2018
    3:16pm
    Thanks Bob, the percentage of fees against the average balance is a more realistic 3.84% but the bulk of the work involved is firstly setting up an account and adding regular deposits so perhaps the fees could be 3.84% of each deposit. My understanding of super funds, and they are all different, is that of the percentage achieved each year that 1% goes to administration and the remainder goes to the member. It would seem more realistic if a fee of 3.84% was charged to each deposit as it was received and no further fees charged. Is it double dipping to charge a fee on balances which also earn 1% for the administration?
    TREBOR
    30th Jul 2018
    6:18pm
    I'll look at it later and think it though - just back from the doc and swollen lymph glands and sort of calloused pleura - cause of the chest pain... she only gave me six or seven documents for tests and such - so I'm planning to be a burden on the healthcare system for a while yet....

    Time for a drink to drown my sorrows....
    TREBOR
    30th Jul 2018
    6:18pm
    At a glance I'd say that any chance for a double dip would be SOP.
    Grateful
    30th Jul 2018
    12:12pm
    You'd have to be severely sight impaired or with vested interests not to see how shocking our superannuation system has become. These findings from the Royal Commission should surprise no one and I don't think they really will to those that can do something about it, the government.
    The faults are patently obvious to anyone who has even the most basic economic knowledge.
    Extremely risky investments, supported and encouraged by massive government tax incentives, are just the start.
    Huge profits made by banks, fund managers, real estate agents and so called "financial advisers".
    It won't take much to remedy most of the faults, but which government will have the courage?
    Hopefully, the Royal Commission will embarrass them sufficiently to finally do something before it gets even worse.
    ace
    30th Jul 2018
    12:49pm
    I lost twice due to 2 poor advisors & one was assisted by receivers KPMG !& no come back then !
    Rae
    30th Jul 2018
    2:26pm
    My husbands superannuation was long gone into receivers hands also when he died and I went looking for it.

    It was a learning experience.

    It's why I keep my investments outside superannuation and pay the taxes.

    Maybe when Keating started it and it was tax free going in and the returns were tax free and you paid coming out right at the end it might have been a good compounding investment but all the changes have made it very unrewarding for the bottom 60% of income earners in my opinion.

    And absolutely terrible for defined benefit pensions or those who bought up annuities under the old rules.
    Bombers
    30th Jul 2018
    1:23pm
    Amazingly late last year in page 20 of our local weekend newspaper Colonial First state transferred nearly 400 million dollars to parent company, Commonwealth Bank. I wonder if the money was super profits that should have been transferred to First State members?
    Old Geezer
    30th Jul 2018
    3:51pm
    The CBA shareholders deserve a return on their investment in Colonial First State so there is nothing wrong with that at all.
    TREBOR
    30th Jul 2018
    6:21pm
    Why was the $400m transferred? Doesn't say anything about 'shareholders earning a living' from it... sounds more like an Alan Bond type transfer between companies to avoid something somewhere..... I sincerely doubt the CBA shareholders will see a cent of it.

    Probably a 'gift' to pay their enraged customers - and thus will be written off as a tax loss... beeziness eez good in El Grande Republica Da San austrador....

    A government with balls would dictate that since you already had all the tax dodges involved in your ripping off your investors/customers/clients - your need to now pay them out is emphatically not a tax deduction.
    Bombers
    2nd Aug 2018
    10:50am
    I thought the CBA made enough profits from home loan interest rates, credit card above 20% interest rates and the dodgy practice of deceiving customers with poor advice that only maximised the quotas for their financial advisers! Was burnt in early days of home loan mortgage when they couldn't allow fortnightly payments, could only do monthly, so naturally joined a credit union. Where a personal loan where the minute you paid extra into it, this amount straight away came of the loan, unlike CBA holding it back till the next month, added new interest, then took of your normal repayment and finally the extra payment! Then received a letter from CBA saying now your home loan is paid of, do you want to invest money with us because we are so safe and trustworthy, not! Hence Royal Commision!

    30th Jul 2018
    2:12pm
    Its about time we have a royal commission on industry suoer funds ,
    How much is being siphoned off to labor unions,
    Are the returns actually finding its way back to the super members?

    Somethings rotten in the state of Denmark
    Rae
    30th Jul 2018
    2:33pm
    Yes I'd like that and also how much is siphoned from retail funds into CEOs pockets and parent bank companies.

    How are commissions designated for advisors?

    How much goes to the IPA and Liberal party and BCA and similar business union organisations too.

    The composition of all the Boards needs to be examined.

    How many employer reps on boards and how many worker reps?
    Are there worker's reps or just employers and unions. If not why not?

    Do the retail funds actually have worker reps on their Boards?
    TREBOR
    30th Jul 2018
    2:34pm
    I've laid this out before - superannuation funds are a 'business venture' by Unions - which run as businesses in order to meet their costs of operation. These are considered to be 'separate operations' from the Union and just a 'business venture' source of income to it.

    I, too, agree that there should be zero place for Union hacks to be on the boards etc, since that is as bad as these company structures that pass money between each other to avoid tax etc and to have no liability while copping the rewards.... on the other hand unions need funding from somewhere to operate and unless firms etc are suddenly going to be totally ethical and legal in the practices, there will always remain a place for Unions (and regulations over 'free enterprise).

    Any party holding an interest in a beneficiary while a holding a seat on the board of the beneficant is a conflict of interest.

    The only real difference between industry funds and commercial funds is that industry funds are not as rapacious with their fees structures and not so intent on profit first above all.
    Old Geezer
    30th Jul 2018
    3:53pm
    I had both industry and retail super funds and although they were top performers they were going virtually no where. So I took the money out and put it in a SMSF and todays it is worth many multiples of what was in those funds.
    floss
    30th Jul 2018
    4:34pm
    O.G. I have only a basic idea of things financial yet am living off my industry fund and also making money yet you brag about how great your are and have lost money in super fund investments please explain.
    TREBOR
    30th Jul 2018
    6:23pm
    OG is a mass of contradictions...... but he adores the limelight.
    Ausdigga
    31st Jul 2018
    7:09pm
    Trebor is right you know, I've watched these posts for a long long time, maybe even longer and one of the regular posters on this site contradicts,
    brags and generally regards himself as
    Jimmy Buffett's equal. I find this site is more palatable if I skip over the posts from one venerable gent .????
    DeepBlue
    31st Jul 2018
    1:34am
    Which industry has the biggest and fanciest buildings in town? Who's money paid for these palaces? The shareholders? The directors? The senior executives? Or us customers?

    It really is wishful thinking to consider that a Royal Commission can tidy up the entrenched criminality, corruption and exploitation by the banking and finance industry. A UK study by eminent persons reported in 2014 it will take at least a generation of concerted effort to rid this industry of the entrenched attitudes that allow directors and executives to believe they have a right to exploit and rip-off their clients. See www.theguardian.com/business/2014/nov/26/banking-toxic-culture-generation-clean-up-thinktank

    This industry has centuries of entrenched exploitation of the people they are supposed to serve. Here is an example of their blatant arrogance:

    “Let me issue and control a nation’s money and I care not who writes the laws.”
    - Mayer Amschel Rothschild

    “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply.” - Nathan Mayer Rothschild

    The recently appointed head of Australia's Reserve Bank had his last job at the Bank of International Settlements, the central bank of central banks, which is owned by the Rothschilds. So who do you think is running Australian banking? Could it be the same people who inspired others to say:

    “The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities, states and nation. At the head is a small group of banking houses generally referred to as ‘international bankers.’ [THE ROTHSCHILD/ROCKEFELLER FAMILIES!] This little coterie… runs our government for their own selfish ends. It operates under cover of a self-created screen…[and] seizes…our executive officers… legislative bodies… schools… courts… newspapers and every agency created for the public protection.” - John F Hylan - 1922 (New York City Mayor)

    "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilised world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." Woodrow Wilson, (28th USA President).

    This domination permits and facilitates the predatory arrogance which can be so shocking to people working outside the banking and finance industry:

    http://www.fool.com/investing/general/2012/12/09/the-great-sewer-of-the-financial-system.aspx

    http://www.fool.com/investing/general/2010/05/12/this-is-why-i-hate-wall-street-people.aspx

    And here is an insight into what some bankers think about how to deal with their clients:

    http://www.fool.com/investing/general/2010/04/19/goldman-sachs-and-the-art-of-ripping-your-clients-.aspx

    Who did blow up the economy in 2008 and why:

    http://www.fool.com/investing/general/2010/04/13/banks-blowing-up-the-economy.aspx

    And lots of apologies from the bankers for repeatedly doing the same old stuff – lying, cheating, exploiting and stealing from their customers – over and over again, so they can get rich quick:

    http://www.fool.com/investing/general/2013/06/25/deja-vu-all-over-again-the-55-greatest-wall-street.aspx


    It's not that we haven't been warned:

    Thomas Jefferson's (3rd President of the USA) warning – in 1809 - about bankers is rather prophetic. “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    "Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." Sir Josiah Stamp 1880 -1941 (industrialist, banker, economist, writer, civil servant)

    Four USA presidents were assassinated soon after apposing or denying the international bankers their control over national finances. Kennedy was the most recent, after he made a new law to print currency by the government, rather than buy it (with taxes collected from citizens) from the Rothschilds owned central bank; the USA's Federal Reserve.

    The Rothschilds have owned Reuters news service since 1880. On the day the World Trade Centre towers were destroyed in a controlled demolition (the fire brigade was already in the twin towers investigating basement explosions before the planes hit), the BBC broadcast the collapse of Tower 7, when in fact it was still standing and visible in the back of their live shot. https://www.youtube.com/watch?v=677i43QfYpQ The BBC's defence was they were relaying a Reuters report. Tower 7 collapsed in the third controlled demolition that day, about 20 minutes later.

    The Rothschild banking family established new central banks in oil rich Iraq and Libya following the USA's declaration of war which followed the controlled demolitions at the World Trade Centre.

    A Royal Commission working cautiously around the edges of the corrupt and criminal banking and finance industry is unlikely to create the changes needed to reverse the present continued shift of income and wealth into the hands of the 1%. An OECD report some years ago stated that the wealth gap between rich and poor is getting bigger, faster, in developed countries. This is the inevitable outcome of the banksters abuse of power and predatory exploitation of the populace and governments. See:

    The American situation: https://www.youtube.com/watch?v=QPKKQnijnsM

    The World situation: https://www.youtube.com/watch?v=uWSxzjyMNpU

    The OECD Report: https://www.youtube.com/watch?v=ZaoGscbtPWU

    2015 OXFAM Charity report: http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland

    2018 OXFAM charity report: https://www.oxfam.org/.../2018.../richest-1-percent-bagged-82-percent-wealth-created...

    “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” - Lord Acton (British Historian< Moralist and Politician – 1834 to 1902.)

    It's more than a century on, but the banksters still exploit us like farmed animals. We work hard to create wealth, and they fleece us of it.

    Henry Ford, founder of the Ford Motor Company got it right. “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”. But a major revolution - or concerted action by Seal Team Six around the world - is probably the only way any real change will occur to reverse the income and wealth shift the banksters have achieved.

    "The only thing necessary for the triumph of evil is that good men do nothing." - Edmund Burke (British Philosopher)
    Anonymous
    31st Jul 2018
    2:24am
    Leftist biased conspiracy theory much ?
    If not for these capitalist, we would be working on a farm serving out communist feudal lords
    Hoohoo
    3rd Aug 2018
    4:39pm
    You silly old dill, olbaid. So we can only choose Fascism or Communism, hey?

    And use fear to make the common person cower into submission.

    If only we had leaders who didn't call themselves left or right, we might stand a chance against these rogues.


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