Sep 25, 2012

The conflict of interest costing super funds a motza

Related party transactions illustrate how conflicts of interest can cost retail super funds millions. A scandal far worse than anything conjured up by critics of industry super looms.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

While a campaign against industry superannuation funds has been unfolding in the media and from the Coalition, a scandal far worse than anything conjured up by critics of industry super has been out in plain view for at least two years.

Tony Abbott launched an attack on industry superannuation funds in March, describing them as a “gravy train” for “venal union officials”. The Australian quickly fell into line and has run a series of critical articles and op-eds on industry super ever since. Usual suspects Judith Sloan and Henry Ergas have weighed in to attack industry superannuation funds; this week, Sloan explained her own personal nightmare of industry superannuation — having to be on a board of a fund with a gardener. The AFR has also chimed in with some critical coverage.

Free Trial

Proudly annoying those in power since 2000.

Sign up for a FREE 21-day trial to keep reading and get the best of Crikey straight to your inbox

By starting a free trial, you agree to accept Crikey’s terms and conditions


Leave a comment

4 thoughts on “The conflict of interest costing super funds a motza

  1. muruk

    If super is compulsory and employment is supposed to be rising shouldnt overall membership be rising – is someone telling fibs about emploment? Or is the decrease due to the closure of all the small accounts when canberra grabbed the cash? Or could it be that members consolidated several retail accounts into one industry account?

  2. John Bennetts

    Muruk, my personal experience is that a year ago I was member of two funds. I closed one.

    No doubt, as transportability of money between funds improves and knowledge of how to do so becomes more common, there will be a trend downwards in the number of funds per member.

    Besides which, there are 26.5M accounts in an Australia of only 22M people. That’s close to two funds per member, I would guess (Children and non-superannuated retirees and some unemployed are not members). Why pay annual membership costs of several thousand dollars twice, when once is sufficient?

  3. Steve777

    Financial Planners evolved from Life Insurance Salesmen. At the end point of the evolution, we should have an independent professional who charges a fee for a service, like a solicitor. Before the evolution started, the ‘planner’ was in fact a salesman for a company’s products. At that time, the customer probably understood the score, that the person explaining the benefits of the product was, like another who might try to sell them a vacuum cleaner, after commission. However, it was during the course of the evolution that conflicts of interest became a serious problem. Planners were still acting as agents who received commissions, although now no longer tied to a company. Further, the products they were selling were much more complicated than the older products, replete with complex fees and commissions. It is in everyone’s interests, including that of planners, that this evolution be completed as soon as possible.

  4. Dogs breakfast

    BK, you could follow this story through and find something worthwhile at every level. At its core though it is a gravy train for all-comers, just that the industry funds generally have something other than a profit motive to guide them.

    The real money waster, the real kicker, is the extent of outsourcing, and then outsourcing of the outsourcing etc, and at each stage they take a clip of the total funds with no guarantees of performance, no real accountability. The worst thing of all is that largely the funds cannot beat the market, because they are the market. Funds under management now make up a substantial amount of the total of all sharemarket equity.

    The rort is that the fund managers are allowed to charge according to a % of funds under management, but the work is the same whether they are investing $100 or $100m.

    It makes no sense, never has, and never will. Its just the industry to get into if you have sfa real skills and want to make inordinate amounts of money. In other words, it attracts the shysters’ shysters.

    And the average punter is the great loser.

    Plus ca change …………

Share this article with a friend

Just fill out the fields below and we'll send your friend a link to this article along with a message from you.

Your details

Your friend's details