Kristian Fok, chief executive of the $110 billion Cbus, wants more regulatory guidance on SMSF establishment to highlight what he believes is the true cost of setting them up, but concedes that profit-to-member funds need to do more to keep the members they are haemorrhaging to vehicle and upstart retail platforms. 
 
In a wide-ranging interview with Investment Magazine, Fok calls for more guardrails to be put up around SMSF establishment and advice to prevent fraud and ensure that fee deductions are in consumers’ best financial interests.  
 
“What I’m saying is that people are being promised things, but the actual costs, the actual evidence is not comparable,” Fok says.  
 
Fok says he doesn’t want to establish a minimum balance for SMSF establishment but for the regulator to provide more guidance around “what is economical”, noting that ASIC used to consider the “starting point” for SMSFs to be a minimum balance of $500,000 in order to achieve performance comparable to that of APRA-regulated funds.  

That guidance was issued in 2019 but abandoned in 2022 following lobbying from the SMSF Association, which worked with the University of Adelaide on research that showed there was “no material difference” in performance when funds had significantly less than $500,000. Previous research by Rice Warner made similar findings.  
 
But Fok also wants more disclosure around how advice fees on “complicated investment aspects” impact returns so “that consumer can actually see the true net of return outcomes” and regulators will have a database to determine whether deductions were actually in their best financial interests.  
 
“In the same way as our performance test benchmarks whether our active management is truly adding value over a straightforward strategy, should the cost of advice to support a complicated strategy be included in terms of its impact on net returns?”  
 
“They’re promising things that we know, institutionally, are very hard to deliver. Certainly they’re charging for it, right? We’ve heard of examples of advice fees up to $30,000 out of super savings to support giving this very sophisticated advice on manager selection. 
 
“We have to declare asset consultants, fund manager fees and our own costs, and they come off our reported return – why would you not ask for the same transparency under that model or under SMSFs?”  
 
Crypto sharks and spruikers  
Fok says his recent foray into the debate around SMSF regulation and advice is a result of scammers unsuccessfully targeting his father, who has an SMSF.  
 
“I’ve got nothing against [SMSFs] – they work pretty well for those that have enough of a balance.”  
 
He reserves particular ire for crypto spruikers who take out online ads to convince members to open SMSFs and invest in the asset despite its volatility, and says that while the anti-scams framework – which puts the onus on telcos and social media companies to crack down on them – is good policy, the regulators need to be “resourced differently” to tackle the issue.  

Fok says that, with regulatory fees increasing, the regulators should be using AI to target scammers but that they also need better data to do so.  
 
“We have to empower the regulator through intelligent data and give them that capability to actually start to get these things early. At the moment, they’re asking us to flag if we’re seeing unusually high trends. We’ll do it absolutely, because we’ve been concerned about these things, but it’s a very analog way.”  
 
“Our regulatory fees are going up,” Fok says. “The same way we have to use AI and technology because they’re powerful ways of reaching members, you can use those same things to actually target, whack-a-mole.  
 
Fok thinks SMSFs should be included in the Compensation Scheme of Last Resort, but doesn’t support the cooling-off period for super switching proposed by the government in the aftermath of the $1 billion collapse of Shield and First Guardian master funds, saying that super funds already have friction points to deal with fraud and that changes will do little to help victims of scams or high-pressure sales tactics.  
 
“With a cooling-off period, they’ll just use that period to keep at them and keep convincing them,” Fok says. 
 
Choice versus compulsion  
Fok’s comments on SMSFs come as industry and profit-to-member funds haemorrhage members to retail platforms and as SMSF establishment rises among younger members. But he says that he’s got “no problems with competition” and that super funds “have a lot of work that we should be doing”, especially around proactively educating members.  
 
“We cannot act like our members are disengaged. They will be engaged – it’s whether we engage them or others do. I’m all for those platforms actually understanding where their members are and using technology and social media in the right way to engage and educate; I think that’s been very powerful. Frankly, we’ve been asleep at the wheel, and we need to address it.”  
 
Fok says that Cbus “needs to go where [its] members are” but drew the distinction between “where they are” and “what they are being convinced they need”.  
 
“Younger members are in this wonderful space where they’re earning good coin… and have the capacity to invest and save up more than anyone else. But they don’t come in with basic financial education, and they’re seeking it – they’re hungry for it.”  
 
“[But] we believe costly complexity is not the answer. So we actually need to engage with them and say ‘look, here’s the basics of how you can build wealth – it’s different to gambling’. We need to engage and educate our members in what will build their wealth.”  
 
While crypto has become a bigger part of the industry conversation – and some funds are finding innovative ways of including it in their portfolio – it’s an area Cbus will continue to steer clear of. Fok says that the fund’s self-directed investment platform allows members to invest in ETFs, including gold, but questions whether it’s good advice “to invest all your money in an asset that can halve overnight”.  
 
It’s difficult philosophical territory that the superannuation industry has found itself in more often over the last year, with the collapse of Shield and First Guardian  raising tough question about how much protection should be afforded to those who are thought of as “swimming outside the flags” – and whether they should even be allowed to.  
 
“That’s a policy issue,” Fok says. “But without the evidence of where those boundaries lie – without, for instance, saying what the true returns are after costs – it’s really hard for there to be a clear policy discussion. I don’t want to dissuade innovation… but it needs to be well-informed.”  
 
But while Fok is clear that he sees attempts to weaken compulsion as the efforts of “lazy people” who want members to “sacrifice their future” to solve policy issues in the present, he accepts that super funds must play a role in convincing members that compulsory superannuation requires will ultimately benefit them.  
 
“We have to show the vision around how these small decisions today are the ones that are going to pay off. It comes down to that basic thing around teaching people about the power of compound interest, the power of the long-term, and that’s hard when society is pressing people to be successful overnight. What’s the latest hack?” 
 
“We know the true path to wealth development is patience. We have to move from the fact that we have benefitted from disengagement… to actually educating people and engaging with their concerns. The issues around housing affordability and so forth – we do advocate for things that will improve supply, but it’s no silver bullet.” 
 
That members have become so disengaged from super is a cruel irony; it was, after all, one of the (often literally) hardest-fought industrial relations reforms, while the people who fought for it often never received its full benefit.  
 
“I think that’s a real showcase of long-term thought leadership, which is harder to come about nowadays. Those stories around people that saw this as an opportunity to address a real problem in the future, who were willing to make a sacrifice up front, knowing they would not truly benefit, are stories that we can retell for others.  
 
“Some of the things that are hard and which may not fully benefit the people who fight for them, but which future generations will benefit from – we should be thinking about that again.”