If Australia’s fund members are divided into four categories as Jeremy Cooper wants them to be, there’s a good chance that much of the colour and innovation we see today could be lost. To me the most startling recommendation was the one which, in my opinion, would see just about every Australian worker not already operating a self-managed fund placed instead into a “universal” category, under which they would be sent “back to the future”.

They’d be offered only one investment strategy (confusingly the report says this should include a target-date strategy), with vanilla insurance and minimal reporting. Isn’t this the kind of thing BT Investment Management came in and broke up during the 1980s? (Well, Ian Martin is on the Review panel.) I say “just about every Australian worker” will be deemed “universal” because under the Cooper recommendations, this is where they will end up if they do not make an express choice otherwise.

Unless there is an amazingly successful advertising campaign heralding the new regime, the proportion that choose to join the more sophisticated ‘choice’ category – that is, the category that looks identical to a public offer super fund as we know it today – will be similar to the proportion that has, to date, made an active decision about their investment choice and insurance, which is somewhere south of 20 per cent. This fragment of the populace will then do a lot of heavy lifting on costs.

Cooper thinks the bewildered majority have for too long been subsidising the “bells and whistles” enjoyed by this engaged few. On his watch, the “costs of the compendious disclosure documents, advertising and transactional infrastructure required to facilitate member investment choices will be borne directly by those in the choice sector”. There will be accounting standards to ensure no cross-subsidisation, and the report suggests those moving from “universal” to “choice” be made to pass through a “suitability gate”, which sounds like a lot of hard work for somebody who might only have become mildly interested in super.

I fear that the end of cross-subsidisation will force funds to dramatically hike their fees for a comprehensive service, creating a vicious circle whereby “choice” electors then back out – tellingly, no “suitability gate” is suggested for those going the other way. We need to be careful, as Doug Little, of Aussie equities boutique Constellation Capital, said in his submission to the Cooper Review, that this does not translate to most super accounts ending up in index funds, tracking listed markets only.

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