Superannuation fund trustees are, in effect, being left to their own devices in managing $2.6 trillion of Australians’ retirement wealth, while being “surrounded by temptation” to preference private interests over their members, the Hayne royal commission has been told in explosive opening remarks.

Calling into question the level of regulatory oversight and the ability of consumers themselves to monitor what is happening with their super, senior counsel assisting, Michael Hodge, posed the question “What happens when we leave these trustees alone in the dark with our money?” on the first day of the fifth round of hearings focusing on super.

Referencing the recently released draft report by the Productivity Commission into the super sector, Hodge questioned whether the “behind closed doors” nature of APRA’s supervisory activities might prevent the regulator’s private enforcement actions from deterring poor behaviour in the broader industry.

The corporate watchdog, he said, was not responsible for overseeing the new obligations directors were handed after the Cooper Review in 2009, which obligated them to act in the best interests of members.

“On any view, there is not presently a dedicated conduct regulator for superannuation trustees in Australia,” Hodge told the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

With consumers being “unable to do anything more than peer dimly through the darkness of their superannuation trustees” and without sufficient regulatory oversight, Australians rely on compliance by trustees themselves.

These trustees face many “temptations”, Hodge said.

“[Temptation] to preference the interests of their sponsoring organisations, to act in the interests of other parts of their corporate group, to choose profit over the interests of members, and to establish structures that consign to others the responsibility for the fund, and thereby relieve the trustee of visibility of anything that might be troubling,” he added.

The commission received an extraordinary amount of evidence from consumers and the superannuation funds themselves. Among 7961 submissions received from the public via its web portal, it had identified 1244 relating to superannuation.

Scheduled to appear on Tuesday are AustralianSuper chief executive Ian Silk and head of mid-risk assets Jason Peasley.

Some key themes to emerge from consumers included concerns about fees for financial advice, management or administration that weren’t disclosed or didn’t result in any services provided.

One example was a fund commencing ongoing management fees without adequate explanation after three years of these fees not being charged. Another was a consumer who was charged adviser fees despite having taken out the superannuation policy directly with the super company in the absence of an adviser.

Consumers were also confused about which insurance policies they had signed up for and whether they could opt out.

After reviewing the trove of documents requested from a range of superannuation trustees, Hodge controversially took the view that he had identified fewer examples of possible misconduct from industry funds than from for-profit retail funds.

He identified a range of key topics that would be the focus of hearings in the coming two weeks.

One was the selling practices of banks and their related superannuation products, and concerns the “proximity between the fact-finding process and the discussion about the product was leading branch staff to provide personal advice to customers about their superannuation when they were only authorised to provide general advice”.

The inquiry would also explore the making of payments by industry funds to sponsoring organisations to assist with marketing, as in some cases there were no formal processes to track whether the agreed-upon benefits had been delivered.

Another area of concern would be the payment of grandfathered commissions by retail funds. None of the industry funds reviewed were paying commissions. But apart from Mercer, all retail funds were “paying very substantial amounts of commission”, five years after Future of Financial Advice legislation targeted conflicted remuneration structures, including commissions.

“You may very well wonder, commissioner, how the payment of commission to financial advisers could be in the best interests of members of superannuation funds,” Hodge asked.

The way trustees handle members who have multiple superannuation accounts will be a key topic, with 40 per cent of Australians holding more than one account, leading to concerns about duplicated administration costs and overlapping insurance policies.

The commission will also be concerned with how funds monitor the performance of the products they are offering and engage in performance attribution – a topic the Productivity Commission struggled getting answers about in an industry-wide survey it conducted.

Unlike the Productivity Commission’s investigation, which was concerned with industry-wide outcomes, the Kenneth Hayne’s royal commission will target the misconduct of particular entities in relation to member funds, and then look at contributing causes and recommendations to address it.

It promises to be an enlightening couple of weeks.

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