Shake-up is on the way

Alex Dun­nin, ex­ec­u­tive di­rec­tor, re­search and com­pli­ance, Rain­maker Group

Money Magazine Australia - - IN BRIEF -

It’s been a tough few months for the su­per­an­nu­a­tion in­dus­try fol­low­ing rev­e­la­tions at the royal com­mis­sion into mis­con­duct in the fi­nan­cial ser­vices sec­tor. But be­fore we de­spair at some of what we’ve been hear­ing we should ap­pre­ci­ate that the prob­lems the royal com­mis­sion has iden­ti­fied have not been with the funds that are run by the ma­jor banks but with the con­vo­luted ar­range­ments that still ex­ist be­tween them, or rather their trustees, and their net­works of aligned fi­nan­cial ad­vis­ers.

The irony is that many of the funds they run are ac­tu­ally quite sound – re­tail funds as a group are now as cheap as in­dus­try su­per funds while in some as­set classes re­tail funds are the best per­form­ers in the mar­ket. This fee revo­lu­tion is so sharp that Aus­tralia’s smartest re­tail su­per­an­nu­a­tion funds are Aus­tralia’s cheapest.

This brings us to what is go­ing to be the main legacy of the royal com­mis­sion: the dis­en­tan­gling of com­plex re­la­tion­ships be­tween su­per funds and their fi­nan­cial ad­vis­ers. It has to hap­pen be­cause it’s these re­la­tion­ships that are hold­ing back the su­per in­dus­try. It’s im­per­a­tive this hap­pens quickly be­cause un­less it does, re­tail su­per funds will sim­ply not be able to move on from the dis­as­trous head­lines now plagu­ing them.

But the good news is that this is al­ready hap­pen­ing. In the past two years, the fi­nan­cial ad­vice and re­tail su­per­an­nu­a­tion mar­ket has gone through mas­sive re­struc­tur­ing and will soon be un­recog­nis­able from what it was be­fore.

The royal com­mis­sion just con­firms that the de­bate about why su­per needs to change and lift its game is over. Il­lus­trat­ing this, al­most all of Aus­tralia’s large su­per­an­nu­a­tion com­pa­nies have now an­nounced they are end­ing grand­fa­thered com­mis­sions and tied ad­viser pay­ments.

These changes will hap­pen be­cause the royal com­mis­sion has re­minded ev­ery­body that su­per funds are to be run for the ben­e­fit of their mem­bers, and that the com­mer­cial in­ter­ests of those who run them have to take a back seat.

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