Members of MLC Super Fund – owned by National Australia Bank – have been paying fees that they could have easily reduced or in some cases switched off, but this was not clearly explained, the Hayne royal commission has heard.

One fee, the “plan service fee”, could simply be “switched off” if requested, but NAB did not clearly inform its customers they had this right, the inquiry heard yesterday.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry also heard that one customer, who could have switched to another account with a similar investment offering but lower fees, raised questions over whether or not the NAB adviser she was paying the “plan service fee” would have disclosed this, due to possible conflicts of interest, and a rule against giving personal advice.

The “plan service fee” was carried over when customers were switched from a MasterKey Business super account to a MasterKey Personal account, Paul Carter, the former executive general manager of wealth products at NAB, told counsel assisting the commission Michael Hodge.

The fee covered onsite education, general investment advice and insurance arrangements but not personal advice.

Management’s discovery of this led to a $67 million refund to customers two weeks ago. This followed NAB last year being forced to refund $34.7 million it had charged via this fee, even when clients did not have an adviser linked to their account.

“Management felt at the time [in 2012] an entitlement to charge the fee,” Carter said. “We ultimately concluded that was not the right basis.”

While the product disclosure contained words indicating a customer could negotiate the fee, Hodge put to Carter that this was a poor choice of words, as there could, in effect, be no negotiation, simply an instruction to turn off the fee.

Hodge asked if the decision of the trustee to continue charging this fee after accounts were transferred could be considered to be in the best interests of members.

“That fee at the time was seen as fair and reasonable,” Carter said.

There were other examples of poorly explained charges. Another fee, the “adviser contribution fee”, was not a fee for service at all.

“The adviser contribution fee is best described as a commission,” Carter said.

“You’re saying that because there’s no agreement to provide any service for it?” Hodge asked.

“Yes,” Carter replied.

Hodge also presented details of an MLC MasterKey Personal member account that was 100 per cent invested in cash with a one-year return of 1.2 per cent. Total fees amounted to $929 for an investment that returned $1032.

The “plan service fee” was $186.47, along with a 1.05 per cent admin fee and $65 fee to implement the government’s Stronger Super reforms.

Hodge asked whether the member could have been better served in another account.

“This seems like the type of thing where, on its face, no one could believe it is in this member’s best interests to remain in this product, incurring these fees while wholly invested in cash,” Hodge said. “Do you agree?”

“No,” Carter replied. “This member has made an explicit choice to move 100 per cent of her assets into a 100 per cent cash fund,” he said.

Carter said there could be good reasons for this, given the historically low interest rate environment. But it did turn out another product NAB had available, called MasterKey Fundamentals, would have also allowed her to be 100 per cent invested in cash but with a lower administrative fee.

Hodge asked whether the adviser, under the plan service fee, would be able to advise her to make this switch if the customer called, given the limitation against personal advice.

“The adviser could inform the member of the different options that are available,” Carter replied.

Hodge asked if the adviser could advise the member to migrate to different funds that were entirely not operated by the NAB Group and didn’t have the same fees on cash, to which Carter replied the adviser could.

“The problem is if the adviser did that he would no longer be paid the PSF,” Hodge replied.

“Correct,” Carter said.

Did management consider net returns for members like this who were wholly invested in cash? Hodge asked.

“I don’t recall,” Carter replied.

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