It takes a lot to shock someone in the superannuation industry these days, but Jeremy Cooper did the trick with his address to the ASFA luncheon in Sydney last month. The moment you could actually hear the jaws drop was when the ASIC deputy chairman, who’s now running Chris Bowen’s ‘super review’, lumped in those long-suffering funds managers with…real estate agents. And worse, investment bankers.
“These are just about the only professions that still charge a flat percentage fee. So as a funds manager’s assets go up, scale does not decrease the fees, they actually just keep going up…My bones tell me this is an issue.” And Cooper made no bones about listing a few other shortcomings in the superannuation industry.
The “most egregious” fee-grab he’d seen was against hapless workers who’d landed in their employer’s default corporate master trust, had never received advice yet were still paying a commission on their compulsory contributions. So don’t expect that rort to continue. Playing the ‘wide-eyed innocent’ for maximum effect, Cooper also wondered aloud why super funds had no equivalent of an AGM, whether the AIRC’s granting of exclusive default super fund status in awards had been a sufficiently transparent process, why trustees had let funds managers introduce performance fees with no reduction in the base fee, and why super fund members didn’t band together and form the equivalent of an Australian Shareholders Association.
(Given just about everybody over fifteen has some kind of super or pension account, I’d have said there was already a super member’s lobby group out there called ‘Parliament’, but I’m obviously mistaken.)
In proposing a solution to the ‘problem’ of percentage-based fees for funds managers, Cooper somewhat echoed Frontier’s Fiona Trafford- Walker in his proposal for a “fixed cost plus transparent margin” base fee, combined with a performance fee or penalty based on “a rolling five year comparison with an appropriate benchmark”.
Expect funds managers to take to the streets if this ‘flat fee’ idea starts to get legs.