(Image: AAP/Joel Carrett)

At Westpac’s annual general meeting tomorrow, investors should be asking questions not merely about the implementation of the banking royal commission, Westpac’s money laundering offences and its assistance for paedophiles to abuse children, but whether the bank is going to compensate clients who have been dudded and gouged by its BT wealth-management arm.

Yesterday, the Australian Prudential Regulation Authority (APRA), in its new “heat map” analysis of MySuper product performance and fees, showed that BT’s Asgard Employee MySuper, Super for Life and BT Lifetime Employer MySuper and Westpac Group Plan MySuper products were all “red” underperformers over five years, while the Asgard Employee and Super for Life and Lifetime Employer products were “red” for high administration fees on balances of $50,000.

No product other than Pitcher Retirement Plan MySuper managed to rack up red on both performance and administration fees. Just for good measure, BT Business MySuper racked up orange on underperformance and red on fees. In short, many BT clients are being overcharged in underperforming funds.

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The “heat map” process isn’t uncontroversial — it’s been criticised by both retail and industry funds for its methodology, and prominent superannuation fund ratings company SuperRatings has criticised APRA’s entire approach. But BT has long featured on superannuation underperformer lists going back nearly a decade, along with other retail funds run by the big banks and AMP. And retail super funds’ fee-gouging has been a matter of record for almost as long.

What’s worse is that the heat map relates to MySuper products, which are default products intended to be “simple, cost effective and well-designed products”. While some MySuper products have high fees but come with high performance, and others are average performers but have low fees, products that feature high fees for underperformance appear to be neither cost effective nor well designed.

BT has also been a persistent critic of industry super funds, which systematically out-perform the likes of BT. In 2018, BT’s general manager of superannuation Melinda Howes attacked industry funds — or what she called, with what was surely deliberate misrepresentation, “union funds”, as she would know perfectly well they are run by employer groups and unions jointly.

Howes claimed industry funds had “damaged credibility”, characterised by “chronic underperformance”, “numerous examples of governance failures and conflicts of interest within union funds” and “the risk of sub-optimal consumer outcomes in terms of performance and cost”.

To be fair, at least BT knows a thing or two about sub-optimal consumer outcomes in terms of performance and cost.

Howes’ spray was after BT had shelled out $12 million in payments to clients whose insurance claims had been denied, but before the start of a class action against Westpac for siphoning off cash from BT Super for Life clients. Howes hasn’t had too many AFR op-eds attacking industry super lately.

While the exposure by the royal commission of retail super funds has led to a mass exodus of members into industry super funds and the abandonment by the big banks of their integrated financial services model, that’s nowhere near enough.

Since the banks moved into wealth management in the early 2000s, retail super fund clients have been overcharged for underperformance as the big banks sucked fees and used related-party transactions to funnel money from customers, while delivering shitty returns well below those of industry, in-house corporate and public sector funds.

The whole rort was shielded by lavish donations to the Liberal Party to protect retail super funds from regulation, gut the corporate regulator and run a smear campaign against industry super funds.

The costs run into the billions — well beyond the cost of compensation for bank customers under the dizzying array of compensation mechanisms worth many hundreds of millions of dollars now whirring away in the wake of Kenneth Hayne’s exposés.

Those billions rightfully belong in the super accounts of hundreds of thousands of Australians who trusted their employers and their super fund to safeguard their interests, and who instead were ripped off.

Westpac and BT are only the worst of a bad bunch. All the major banks should be compensating their super clients for years of underperformance and overcharging. It’s time investors demanded to know how much proper compensation of retail super fund victims would affect the banks’ bottom lines going forward.

Will we ever see a change in banks’ behaviour? Let us know your thoughts by writing to [email protected]. Please include your full name if you’d like to be considered for publication.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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