Assess super on value not fees, Rice Warner urges

In a statement, Rice Warner said the “contentious issue” of super fees needs to be reassessed to consider the value provided by funds, adding that average super fees have dropped from 1.37 per cent of assets to 1 per cent of assets in the last 15 years.

“Overall, the industry is continuing to improve its offer, squeezing in more member services and benefits while reducing its headline fee rates,” the report said.

“Despite the progress, the industry is hampered by incorrect and misleading commentary on the level of fees for superannuation.”

The research house said “hysterical headlines” that fixate on the total fees paid each year are misleading and overlook the successes of the superannuation system.

“We need to change the focus to value not cost,” the statement said.

“Do people know that the Australian superannuation system has provided much higher real returns (5.1 per cent above CPI after tax and fees) over the last 25 years than any other country? And members get intra-fund advice, cheap life insurance and choice of investment strategies too.”

The release of the statement coincides with the royal commission’s public hearings into misconduct within the superannuation industry, which yesterday heard some AMP super members may have experienced negative returns due to their fees exceeding the performance of their investments.

“[Clients] end up with a net negative return because of the sum of both the investment management fee and the administration fee that they get charged on 100 per cent cash?” Counsel assisting Michael Hodge asked of AMP Super chair Richard Allert.

The response was a concise “yes”.

Questioned further on why clients were allowed to place their money wholly in cash despite the poor returns, Mr Allert told the commission “you would have to ask the client” why they chose to place their money in that investment option.

“Your point is, why are they foolish enough to invest their superannuation with AMP?” Mr Hodge asked.

“No, that’s not what I’m saying at all,” Mr Allert said in response.

“I’m saying you would have to ask the client what’s in their mind when they put money into a cash account – and as you’ve pointed out, this person has had a cash account with AMP at least from 1 March 2014 to 28 February 2018. They left the cash there knowing the return they’re getting.”