“At the end of the day, cost isn’t everything. I would be very happy to pay an extra 50 or 100 basis points per year to get quality advice around my portfolio of affairs, because peace of mind is worth a lot. Other may not [be willing to pay extra]. It’s simply a matter of giving people the visibility on these things so they can make informed choices.” When talking about averages, Sherry is quick to stress that there’ll still be a range of fees – potentially between 0.5 and 1.5 per cent – depending on the fund.

“I accept you’re not going to get everyone on 1 per cent unless you legislate to do that,” he says, adding that mandating a cap on fees is not an option he’s considering. However he believes there is wriggle room – or fat – within all four “cost centres” that contribute to the overall fees charged by the superannuation industry; funds management, distribution, advice (both general and specific) and administration. “In terms of funds management costs, scale is important in super,” he says. “You can generally get a better price as a consequence of scale.

We’ve announced policy to encourage fund mergers through the waving of the capital gains tax (CGT) requirements for two years. At the moment the CGT issue is the major barrier to funds when they want to merge. “On the issue of administration, in our devolved system where we have around 600 entities, administration costs have generally been increasing and that’s an outcome of two issues; one is choice of fund, greater transactions and movements, and secondly the complexity of our system… there are a whole range of electable decisions which add to administration cost.

We still have a job to do in simplifying the electable options within our system, and that’s for the Henry Tax Review to consider. Each fund looks at administration issues from the fund point of view and I think we need to shift the solution to administration from the total focus on the fund solution to a systemwide solution.” On advice and distribution, Sherry says it’s important to separate intrafund advice (for example advice on contributions and investment options within a fund) from distribution advice (advice on which fund to join).

“In part we’ve started to tackle the issues of the compliance cost of the disclosure requirements, so that’s part of the cost issue, but the other much more complex and controversial area is the conflicts of interest, and that’s an issue for renovating the house,” he says. “The other issue is distribution advice. In a compulsory system, why should members be paying for distribution advice, because they have to belong, and that also begs a question about what is in members’ best interest in terms of distribution and how that test is applied?”

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