Australia’s superannuation system is one that has maximised agency costs, says Jack Gray, an adjunct professor at the Centre of Capital Market Dysfunctionality at the University of Technology, Sydney.

Agents, according to Gray, do things because it’s more in their own interest and not in the best interests of shareholders. Competition, he says, does not drive agents out.

“In an ideal system, a lesser amount of servicing and number of agents would save two per cent to three per cent a year for a superannuation fund,” says Gray.

“It’s in everyone’s interest except the members to keep the system as it is,” he says.

Forty-three per cent of superannuation fund chief executives see the board as their principals, not their members, according to a survey by Gray.

Competing to produce the best returns often means funds focus on the short term and use active managers, which boosts costs compared to index funds, he says.