Superannuation funds are exploiting members and have forgotten that they are built on other people’s money, according to Australian Securities and Investments Commission (ASIC) chairman James Shipton.
Meanwhile, ASIC is under pressure to make super costs more transparent after a review found disclosure fees were too difficult for the average consumer to understand.
Speaking at the Financial Services Council (FSC) annual summit in Melbourne on Thursday, Mr Shipton warned that the $2.6 trillion industry had a “trust deficit”. He said that issue would be magnified when the banking royal commission resumed on 6 August and focussed on superannuation.
“To be blunt, there has been too much focus in many parts of the superannuation sector on exploiting opportunities to make money from Australians instead of focussing on the responsibilities that come from being the custodians of other people’s money,” he said.
“This must change.”
He said some of the blame for super funds “exploiting” members was due to public apathy when dealing with the sector.
The ASIC chairman was also critical of the delayed reporting of breaches by financial services companies to the regulator, with four years being the average time between a company identifying a breach and ASIC being notified.
He said that there had been a 30 per cent increase in breach reporting by financial services groups in the past year, stressing that there was an urgent need for investment in systems, procedures and policies that more quickly identified problems.
“This is behaviour that leads to unacceptably poor member outcomes in super, and it must stop if Australians are to have real trust in the superannuation system,” Mr Shipton said.
Financial Services and Revenue Minister Kelly O’Dwyer said via a pre-recorded video that it was time to “draw a line in the sand”.
“Use it (the banking inquiry) to separate the behaviours which should not have occurred in the first place, and a new post-Commission era where trust is regained and maintained,” she said.
The Australian reported on Wednesday that ASIC was under pressure to make costs more transparent after a review found consumers were being “dudded” by poor disclosure of fees.
Matt Linden, public affairs director at Industry Super Australia (ISA), said the review showed “fee disclosure was far too complicated for experts, let alone for consumers.”
The review “finds fee disclosure in the superannuation and managedinvestment scheme industry has been haphazard, opaque and open to gaming by funds managers looking to minimise their published fees,” The Australian reported.
It also said that Westpac’s wholly owned wealth arm, BT Financial, “had sent shudders through the sector after it outlined plans this week to introduce a new cut-price 0.15 per cent asset administration fee for customers invested through the BT Panorama Investments and BT Panorama Super platforms, along with a flat account fee of $540 a year.”
On an average account, the move represented a fee cut of 40 per cent.
Are you looking forward to the banking royal commission moving onto the superannuation industry? Are you apathetic when it comes to your super? Do you know what fees you are paying and how they compare to other funds?