From the CEO: the Royal Commission shows bank funds aren’t super

First Super CEO Bill Watson gives a summary and his thoughts of the recent Financial Services Royal Commission hearings into superannuation funds.

“The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has uncovered constant and ongoing misconduct and conduct falling below community standards and expectations over many years by retail superannuation funds.

“Over a two-week period in August, the Royal Commission heard evidence of:
• dead people being charged for financial advice;
• excessive fees on superannuation products;
• Boards of Directors not doing their jobs to act in the best interests of members and to ensure that service providers didn’t charge or make excessive profits; and,
• member funds being used to compensate members for errors made by service providers.

“If it couldn’t get any worse, we heard evidence of some retail funds not being honest with the regulators, who are charged with protecting consumer interests.

Conclusions
“The only reasonable conclusion that could be drawn from the evidence was that owners of retail super funds consistently put their interests well ahead of their members. In many cases, the people who were meant to protect members – independent super fund directors – failed to do their job.

“In contrast, industry super funds featured less prominently and, in the main, avoided headline grabbing stories. The Commission examined money that was spent on The New Daily, Industry Super Australia’s Fox in the Henhouse advertising campaign and, in the case of one fund, HostPlus, entertaining hospitality executives at the Australian Open.

“First Super was not called to give evidence and the Commissioner’s Counsel (lawyer) did not make any submissions against First Super.

“The Closing Submissions on the Round Five hearings on superannuation – also known as “open findings” – were published on Friday 24 August. The 223-page document raises questions including: “Is it appropriate that superannuation be sold through bank branches? Is it reasonable to think that there is any prospect that this is likely to produce an outcome that is in the best interests of consumers?”

“Given the media coverage on this issue, I want to reassure you that First Super – as an industry, profits-to-members super fund – is designed specifically to put its members, and their interests, first.

Next steps
“The next steps are that the Commission is now taking public submissions in response to the Round Five Hearings on Superannuation. This process closes on Friday 21 September. The Commission will then review these and the prior evidence in October. A final report will be published on 1 February 2019.

“We will keep you updated in future newsletters.”