As a result, it is possible to “knowingly or inadvertently disclose vastly different fees for products which have very similar true costs,” Elvish says.

The legislation aims to expose the additional costs taken on by super fund members, such as custody and broker- age, which they would not incur to if they invested their savings directly.

In an industry built to support the financial wellbeing of millions of people in their retirement, and one that enjoys a guaranteed customer base, low-cost products should be the norm. To achieve this, an accurate comparison of the true costs is required.

But the existing Treasury regulations clearly don’t enforce this: they need to be improved to make it compulsory for funds to state these costs. Elvish says a good starting point would be for industry businesses to “pay their own way” and start disclosing indirect costs.

“But it’s just like tax legislation. They change something and smart people manoeuvre around it. This is the same situation,” he says.

Because indirect costs are never fixed – can a custodian predict how much money they’ll net from foreign ex- change rate spreads during a three-year contract? – precise comparisons of the true operating costs of super funds are almost impossible to make. But reliable estimates could be calculated more easily to help funds overcome this problem.

{sidebar id=25}The biggest obstacle in the way of true cost comparisons, rather, is acceptance that fees reported to members would inevitably be higher.

“If you think about it from a commercial perspective there are signifcant financial incentives to have a lower fee outcome to be more competitive and more profitable,” Elvish says.

Industry funds, in particular, would loathe the loss of their apparent low-cost advantage over retail super providers.

“There’s no incentive. That’s the problem,” Elvish says. The incentives are probably skewed in the other direction. Government pressure has been obviously to reduce costs, and to appear to be as cheap as possible is important.”

Ratings houses also respond positively to low fees. But Elvish warns that too much pressure on trustees to cut fees might force them to prioritise price instead of performance.

“You want your trustees to make the best investment decision to achieve the best risk/return outcome for your port- folio on a net-of-fees basis,” he says. You don’t want them to be obsessed with the fee outcome, but the return outcome.”

Trustees should also investigate the true costs of the operations of service providers, such as funds managers, knowing that the published fees they offer might omit indirect costs.