Industry insiders have revealed why banks are distancing themselves from wealth management and how their actions will reshape the Australian financial services sector; via InvestorDaily.
There
are a number of reasons why the big four have decided, to varying
degrees, to put a ‘for sale’ sign on their wealth management
businesses.
Some major bank chief executives have run a ruler
over their advice businesses and seen poorly performing divisions that
just don’t provide enough margin for the group’s bottom line.
Others,
like Westpac CEO Brian Hartzer, have seen the “writing on the wall” and
the mountain of increasing compliance that must be scaled to make
advice operational, let alone turn a profit.
But it may also have
been a strategic play based on negative sentiment, bad press and the
misguided belief that commissioner Hayne would propose an end to
vertically integrated wealth models.
“What
it looks like the banks have done in most cases, or in some cases, is
they’ve picked up their vertically integrated business, which consist of
advice and other products, and have looked to distance themselves from
that by either demerging or selling the wealth business,” Lifespan
Financial Planning CEO Eugene Ardino said.
Speaking exclusively
on the Investor Daily Live webcast on Wednesday (3 April), the dealer
group boss said the banks aren’t actually dismantling their conflicted
businesses – they’re selling them as bundled, vertically integrated
models where product and distribution sit under the same roof.
“That’s
not dismantling vertical integration. That’s really them trying to
distance themselves from wealth management. Whether that now goes ahead
in some cases remains to be seen,” he said.
“Perhaps what could have happened is some sort of recommendation around how to limit vertical integration or how to control it.
“The
issue you have is when you take a business that’s focused on sales and
that business takes over as the dominant force in a company that also
provides advice, then sales wins. I think that’s natural. Perhaps if
they had started there, that could have led to some moderation of
vertical integration.”
The royal commission hearings, more than
anything, were a targeted attack on the sales culture of large financial
institutions, many of which repeatedly defended their models as
profit-making businesses, often beholden to shareholders.
“In
product businesses, their job is to sell. That’s fine. There’s nothing
wrong with that. But if you’re putting an adviser hat on, there needs to
be some separation. That’s an issue of culture,” Mr Ardino said.
I
haven’t seen some of the employment contracts of the advisers from some
of the groups that got into trouble, but I would venture a guess that a
lot of their KPIs talk about new business rather than retaining
business and servicing clients.”
Fellow panellist and Thomson
Reuters APAC bureau chief Nathan Lynch said that despite Hayne’s failure
to propose banning vertical integration in wealth management, the model
will ultimately be dismantled by market forces.
“Hayne points
out that a lot of the dismantling of the vertically integrated model
comes down to the fact that it’s just not profitable. You have an
environment where vertical integration will be dismantled to some extent
by competitive forces and by technology,” he said.
“Servicing
the vast majority of client is going to become very difficult. Most
businesses are starting to pivot to the high end. I think we need to
view technology in advice as a positive, as an enabler.”
The federal government has announced a $600 million fighting fund to support the recommendations of the financial services royal commission, via InvestorDaily.
Buried
on page 167 of the hefty 2019 Federal Budget are the Hayne-related
expenses to be incurred by Treasury over the next five years.
The
government will provide $606.7 million over five years from 2018-19 to
facilitate its response to the Royal Commission into Misconduct in the
Banking, Superannuation and Financial Services Industry.
The
package comprises a suite of measures that fulfil the government’s
commitment to take action on all 76 of the recommendations of the Royal
Commission’s Final Report, including:
•
Designing and implementing an industry funded compensation scheme of
last resort for consumers and small business ($2.6 million over two
years from 2019-20);
•
Providing the Australian Financial Complaints Authority with additional
funding to help establish a historical redress scheme to consider
eligible financial complaints dating back to 1 January 2008 ($2.8
million in 2018-19);
•
Paying compensation owed to consumers and small businesses from legacy
unpaid external dispute resolution determinations ($30.7 million in
2019-20);
•
Resourcing the Australian Securities and Investments Commission (ASIC)
to implement its new enforcement strategy and expand its capabilities
and roles in accordance with the recommendations of the Royal Commission
($404.8 million over four years from 2019-20).
• Resourcing
the Australian Prudential Regulation Authority (APRA) to strengthen its
supervisory and enforcement activities which will support its response
to key areas of concern raised by the Royal Commission, including with
respect to governance, culture and remuneration ($145.0 million over
four years from 2019-20);
•
Establishing an independent financial regulator oversight authority, to
assess and report on the effectiveness of ASIC and APRA in discharging
their functions and meeting their statutory objectives ($7.7 million
over three years from 2020-21);
•
Undertaking a capability review of APRA, which will examine its
effectiveness and efficiency in delivering its statutory mandate, as
well as its capability to respond to the Royal Commission ($1.0 million
in 2018-19);
•
Establishing a Financial Services Reform Implementation Taskforce
within the Treasury to implement the Government’s response to the royal
commission, and co-ordinate reform efforts with APRA, ASIC and other
agencies through an implementation steering committee ($11.2 million in
2019-20); and
•
Providing the Office of Parliamentary Counsel with additional funding
for the volume of legislative drafting that will be required to
implement the Government’s response to the Royal Commission ($0.9
million in 2019-20).
The
cost of this measure will be partially offset by revenue received
through ASIC’s industry funding model and increases in the APRA
Financial Institutions Supervisory Levies and from funding already
provisioned in the Budget.
Lower taxes
Handing
down the Federal Budget 2019-2020 in parliament last night, Mr
Frydenberg said that the budget would restore the nation’s finances
without raising taxes.
“The
budget is back in the black and Australia is back on track,” the
treasurer said, announcing that the coalition delivered a $7.1 billion
surplus.
“Over
the last year the interest bill on national debt was $18 billion,” he
said. “We are reducing the debt and this interest bill, not by higher
taxes, but by good financial management and growing the economy.”
The government has announced immediate tax relief for low- and middle‑income earnersof up to $1,080 for singles or up to $2,160 for dual income families to ease the cost of living.
The coalition will also be lowering the 32.5 per cent rate to 30 per cent in 2024-25,
increasing the reward for effort by ensuring a projected 94 per cent of
taxpayers will face a marginal tax rate of no more than 30 per cent.
“The
Australian Government is lowering taxes for working Australians and
backing small and medium‑sized business, while ensuring all taxpayers,
including big business and multinationals, pay their fair share,” the
treasurer said.
Superannuation
The
Government will allow voluntary superannuation contributions (both
concessional and non-concessional) to be made by those aged 65 and 66
without meeting the work test from 1 July 2020. People aged 65 and 66
will also be able to make up to three years of non-concessional
contributions under the bring-forward rule.
Those
up to and including age 74 will be able to receive spouse
contributions, with those 65 and 66 no longer needing to meet a work
test.
“This measure is estimated to reduce revenue by $75.0 million over the forward estimates period,” the treasurer said.
“Currently,
people aged 65 to 74 can only make voluntary superannuation
contributions if they self-report as working a minimum of 40 hours over a
30 day period in the relevant financial year. Those aged 65 and over
cannot access bring-forward arrangements and those aged 70 and over
cannot receive spouse contributions.”
The
government will make permanent the current tax relief for merging
superannuation funds that is due to expire on 1 July 2020.
“This
measure is estimated to have an unquantifiable reduction in revenue
over the forward estimates period,” Mr Frydenberg said.
Since
December 2008, tax relief has been available for superannuation funds
to transfer revenue and capital losses to a new merged fund, and to
defer taxation consequences on gains and losses from revenue and capital
assets.
The
tax relief will be made permanent from 1 July 2020, ensuring
superannuation fund member balances are not affected by tax when funds
merge. It will remove tax as an impediment to mergers and facilitate
industry consolidation, consistent with the recommendation of the
Productivity Commission’s final report into the superannuation industry.
The
treasurer said consolidation would help address inefficiencies by
reducing costs, managing risks and increasing scale, leading to improved
retirement outcomes for members.
The government will also
reduce costs and simplify reporting for superannuation funds by
streamlining some administrative requirements for the calculation of
exempt current pension income (ECPI).
The
Government will allow superannuation fund trustees with interests in
both the accumulation and retirement phases during an income year to
choose their preferred method of calculating ECPI.
The
Government will also remove a redundant requirement for superannuation
funds to obtain an actuarial certificate when calculating ECPI using the
proportionate method, where all members of the fund are fully in the
retirement phase for all of the income year.
This measure will start on 1 July 2020 and is estimated to have no revenue impact over the forward estimates period.
FSC has mixed feelings
The
Financial Services Council (FSC) welcomed the government’s
superannuation changes to reduce red tape and improve access to
voluntary contributions.
“The
expansion of the work test exemption, spouse contributions and
bring-forward arrangements will provide workers nearing retirement
greater flexibility to make additional super contributions if they are
able. The electronic requests for release of super and simplification of
exempt current pension income calculations are sensible and welcome,”
FSC chief executive Sally Loane said.
“The
FSC also supports the tax relief for merging super funds, as this will
help the superannuation industry consolidate to reduce costs and improve
member outcomes.”
However,
the FSC is disappointed this is not part of a comprehensive product
rationalisation scheme, despite this being a longstanding government
commitment.
“A lack of reform in this area means consumers are locked into older, more expensive products,” Ms Loane said.
The FSC is pleased to note the Budget has largely kept the superannuation settings unchanged. However, Ms Loane said the council
is disappointed the government has failed to reform non-resident
withholding tax for managed funds in the Asia Region Funds Passport.
“This
means Australia will remain uncompetitive in our region, and Australia
will not be competing with Asian funds on a level playing field.
“The
withholding tax on managed funds raises little money, but harms our
competitiveness within Asia, putting Australia’s fund managers at a
major competitive disadvantage in the region.”
ANZ CEO Shayne Elliott has told a parliamentary inquiry that banks triggered the credit downturn impacting the supply of housing finance, via InvestorDaily.
Softening
conditions in the credit and housing space has sparked debate among
market analysts regarding the cause of the downturn, with some
stakeholders, including governor of the Reserve Bank of Australia (RBA)
Phillip Lowe claiming that the “main story” of the downturn is one of
“reduced demand for credit, rather than reduced supply”.
Mr Lowe claimed that falling property prices have deterred borrowers, particularly investors, from seeking credit.
According
to the Australian Prudential Regulation Authority’s latest residential
property exposure statistics for authorised deposit-taking institutions,
new home lending volumes fell by $25.1 billion (6.5 per cent) over the
year to 31 December 2018. The decline was driven by a sharp reduction in
new investment lending, which dropped by $17.7 billion (14 per cent),
from $126.9 billion to $109.2 billion over the same period.
However,
the ANZ CEO has told the House of Representatives’ standing committee
on economics that he believes the downturn in the credit space has been
primarily driven by the tightening of lending standards by lenders off
the back of scrutiny from regulators and from the banking royal
commission.
Liberal MP and chair of the committee Tim Wilson
asked: “Is the reported credit squeeze more demand-driven by borrowers
pulling back or supply-driven by banks being more conservative?”
To
which Mr Elliott responded: “This is a significant question that’s
alive today, and there are multiple views on it. I can’t portion between
those two.
“I’m probably more in the camp that says conservatism
and interpretation of our responsible lending obligations and others
has caused a fundamental change in our processes, and that has led to a
tightening of credit availability.
“It’s a little bit ‘chicken and
egg’,” Mr Elliott added. “If people find it a little bit harder to get
credit, they might step back from wanting to invest in their business or
buy a home, so I think they’re highly correlated, but I do think banks’
risk appetite has had a significant impact.”
Mr Elliott said
that “vagueness and greyness” regarding what’s “reasonable” and “not
unsuitable” as part of the responsible lending test have left the law to
the interpretation of lenders.
“Unfortunately, we haven’t always
had the benefit of a significant amount of precedence or court rulings
on some of those definitions, so we’ve done our best,” he said.
“I
think the processes recently, the questions that this committee has
asked, the questions in the royal commission, have started a debate, not
just with the regulators but with the community about what is the real
definition of [responsible] lending.”
He added: “As a result of
that, we’ve become more conservative in our interpretation, and so we’ve
tightened up, [and some] Australians will find it a little bit harder
to either get credit or get the amount of credit that they would have
otherwise had in the past or would like.
“I’m not suggesting for a minute that it’s wrong, it’s just the reality.”
The chief executive of AllianceBernstein has said that there will ultimately be a recession but it would not be happening this year, via InvestorDaily.
Seth
Bernstein, AB’s president and chief executive officer said that the
firm did not see the economy tumbling over the next twelve months.
“There is clearly a slowdown underway globally but we don’t see the US economy tumbling into a recession this year,” he said.
Mr
Bernstein during a visit to Australian clients said the yield curves
were a good predictor of recessions but were rarely good indicators of
when.
“There will ultimately be a recession but they [yield
curves] are a terrible predictor of the timing of that recession,” he
said.
However, investors would see signs as the markets moved closer to recession territory said Mr Bernstein.
“The yield curve has been flat for a very long time and it will invert closer to a recession,” he said.
Currently
the market was worried about macro events particularly the ongoing
transition of the global trade framework said Mr Bernstein.
“There
is resistance to that framework wherever anyone is disenfranchised or
where anyone finds themselves on the wrong end of change,” he said.
The
blame for the disenfranchised did not just lay with US President Donald
Trump, said Mr Bernstein, but he was the one that inflamed it.
“This
has been going on well before Donald Trump took office but Trump, in
his own distinctive way, is able to articulate it and respond to it very
forcibly for his core constituents – and he has been methodical about
checking off promises that he has made,” he said.
The current
trade barriers had led to a potentially less stable environment that was
not to the benefit of any nation, said Mr Bernstein.
“We are
concerned about a much less stable global trading environment. Lower
levels of global trade will mean lower levels of growth for Australia,
for the US, for the global economy more generally,” he said.
Ultimately,
the trade spat with China would be solved; however, Mr Bernstein said
that while it would be a deal that cuts the trade deficit, it would not
be as far reaching as the trade officials would like.
“Cooler
heads will prevail. I think the president wants a deal with the Chinese,
because he loves deals and he can talk about it in the news cycle, but
it probably won’t be as far reaching as many of us want it to be,” he
said.
A Hong Kong-based banker has applauded Australia for shedding light on issues within its financial sector and warned that the issues revealed by the royal commission are widespread across the globe, via InvestorDaily.
CFA
Institute managing director, Asia Pacific, Nick Pollard has held a
number of senior banking roles, including the MD of exclusive British
bank Coutts and CEO of Coutts Asia.
Speaking to Investor Daily,
Mr Pollard said that while the major banks in Australia have shown a
clear interest to be rid of their troubled wealth businesses, the fact
remains that people need wealth management and financial advice.
“The challenge for Australia, which is the
challenge the rest of the world has, is how do you ensure the demands of
the customers are able to be met by organisations that can provide that
advice in a fair and transparent way?
“The industry as a whole
hasn’t been very good at that over the last few years. That’s why
regulators have become involved and it has become tougher to operate in
this climate.”
While the Hayne royal commission has cast a shadow
over the Australian financial services sector over the past 12 months,
Mr Pollard believes the conversations that are now being had off the
back of the inquiry reflect a positive approach that other markets are
yet to benefit from.
“What Australia is doing, which many
countries aren’t, is bringing this out into the public domain and having
those critical conversations and hopefully can look forward with some
optimism that the industry is owning up to the fact that it need to
improve and needs to do something about it,” he said.
“In many
ways, the issues that are coming out of the royal commission don’t just
apply to Australia. Don’t think that the rest of the world has got these
things right. If there is any kind of introspection by those in the
financial services communities of Hong Kong and Singapore it is ‘Where
do we stand on these issues?’
“At least Australia has been bold enough to being this out into the public domain.”
According
to global research consultants Cerulli Associates, Australia remains an
attractive market for investment managers and asset consultants, both
local and global.
While the royal commission has caused
significant reputational damage, Cerulli Associated managing director
for Asia, Ken Yap, said super funds in particular will still need to
make exactly the same decisions about asset allocation, currency
hedging, and liquidity as they always did, and nothing in the royal
commission is likely to make them choose any different underlying
managers than they have done in the past.
The National Australia Bank has announced an end to its ‘Introducer’ payments program to take effect in October 2019, via InvestorDaily.
The Introducer program was launched by NAB to reward businesses with a commission for new successful lending referrals to NAB.
The program was promoted by NAB as a way to fundraise for communities and as a relationship strengthen program.
The
program has been the source of many problems for the bank with KPMG
being commissioned to investigate the program in 2015 and found large
issues including bankers falsifying documents to issue bogus loans and
serviceability issues.
KPMG
went as far as investigating introducers for links to organised crime
and terrorist financing and NAB continued to investigate the problem and
in 2016 notified the police and ASIC resulting in the sacking of 20
staff and more disciplined.
By October 2019 NAB will no longer make referral
payments to Introducers with chief executive Philip Chronican saying it
was important that the bank acted and changed its actions.
“Through
the royal commission, we heard clearly that our actions need to meet
the expectations of our customers and the community. We need to be
simpler and more transparent to earn trust. We have to put customers
first, to be a better bank,” Mr Chronican said.
Commissioner
Kenneth Hayne in his final report did not recommend the banning of such
schemes but after hearing about fraud issues around such programs did
raise the question about who the introducers were actually working for.
The
program was reportedly responsible for approximately $24 billion in
loans and in 2018 the bank said it was responsible for one in every
twenty home loans it wrote.
Mr Chronican said he wanted Australians to come to NAB because of what the bank offered, not because someone was paid to do so.
“We
want customers to have the confidence to come to NAB because of the
products and services we provide – not because a third-party received a
payment to recommend us.”
The change is significant for NAB and the industry, but Mr Chronican said it was the right thing to do for the banks customers.
“Like
other businesses, we will still welcome referrals and will continue to
build strong relationships with business and community partners.
However, there will be no ‘Introducer’ payments made,” he said.
NAB
is the first of the big banks to remove their introducer program with a
report from ASIC revealing that in 2015 $14.6 billion in home loans by
the big four were sold via introducer channels.
The announcement
is the latest by the bank who recently announced that it would keep all
regional and rural branches open until at least 2021.
The bank
has also extended the protections of the code of banking practice to
small businesses and has supported 72 of the royal commission
recommendations with 26 either completed or in the process of being
implemented.
“NAB has a significant role to play in leading the change our customers and the community want to see.”
Westpac
is still retaining its private wealth, platforms, superannuation and
insurance operations, with the new report estimating that wealth will
account for less than 10 per cent of revenue in the bank’s consumer
division and around 20 per cent in the business division after the
restructure.
Morgan Stanley has forecast that Westpac’s wealth
revenues will fall from more than $2 billion in FY18 to less than $1.7
billion in FY20, due largely to the non-recurrence of the $144 million
Hastings exit fee and the loss of advice revenues.
The report
downgraded the bank’s FY19 cash profit by around 2.5 per cent, due to
exit and restructuring costs and a $100 million loss from wealth advice.
It
has, however, upgraded its prediction for earnings per share by 0.5 per
cent in FY20, citing the exit of the loss-making advice business.
Westpac had estimated it would save around $73 million by dropping the advice business and division.
“The
exit from wealth advice is a logical response to the changing
environment, but we expect ongoing challenges in the remaining wealth
business,” Morgan Stanley noted.
Challenges will include the
effect of the royal commission’s recommendations on the cross-selling of
insurance to banking customers and reduced vertical integration
benefits without advice, the report said.
The analysis also eyed
other potential impacts such as pricing cuts in the platform market, new
technology platform players winning an outsized share of flows and
industry super funds growing in both personal and corporate super.
The retained businesses accounted for around 9 per cent of group revenue in FY18, excluding one-off items.
The
analysis also forecast Westpac will have accumulated $775 million in
customer refunds, remediation and litigation costs across banking and
wealth management over FY19 and FY20.
Morgan Stanley has retained
its rating of Westpac as underweight, saying it sees lower returns and
rising risks in retail banking among other factors, with the analysis
warning there could be risk of a further derating.
Anyone expecting an RBA rate cut to trigger a repeat of the six-year property boom we experienced from 2011 needs to think again, according to one of Australia’s leading forecasters; via InvestorDaily.
Speaking
to Investor Daily, AMP Capital chief economist Shane Oliver said he
believes Sydney is now about halfway through its correction, with
top-to-bottom house price falls to reach 25 per cent in the nation’s
biggest city.
“Melbourne prices have come down by around 10 per
cent. Like Sydney, I think they will come down by 25 per cent as well,
so they’re not quite halfway through the downturn,” he said. “There is a
wealth effect coming through from the price falls we have already seen
and a wealth effect still to come from further falls in house prices.”
The
property slowdown has also forced lenders like ING and Adelaide Bank to
reduce credit or small businesses borrowing against their residential
property.
ING has banned borrowers from using their homes as
security for business loans amid fears of negative equity as property
prices continue to fall.
A credit squeeze in the small business sector,
coupled with the “wealth effect” of falling property prices, which
curtails household consumption, could have serious implications for the
Australian economy.
RBA assistant governor Michele Bullock gave a
speech in Perth this week in which she stated that the wellbeing of
households and businesses in Australia depends on growth in the
Australian economy.
“And a crucial facilitator of sustained
growth is credit – flows of funds from people who are saving to people
who are investing.”
The Reserve Bank is banking on growth of 3 per
cent by the end of 2019. But AMP Capital’s Mr Oliver believes a
reduction in consumer spending and reduced construction activity related
to housing suggests growth could be closer to 2 per cent.
“If SMEs struggle to get credit, then it could be worse than that,” he said.
“I’m
probably in the more negative camp on the wealth effect and I think the
evidence is there. RBA governor Philip Lowe gave a speech two weeks ago
where he said that a 10 per cent decline in net housing wealth would
reduce consumer spending by 0.75 per cent in the short term and 1.5 per
cent in the longer term.
“A 10 per cent fall in net housing
wealth would be equivalent to a 7 per cent fall in actual house prices,
given a degree of gearing. Net housing wealth is about 75 per cent of
total housing wealth, so if you’ve got a 10 per cent fall in total
housing wealth, it implies a bigger impact of around 2 per cent in
consumer spending.”
Unemployment is a key indicator for measuring
the impact of these effects on the economy. Mr Oliver predicts the
unemployment rate will increase from 4.9 per cent to 5.5 per cent by the
end of the year.
Research released by the Reserve Bank of
Australia shows that the central bank’s decision to begin cutting rates
in November 2011, from 4.75 per cent to 1.5 per cent today, had a direct
influence on booming property prices.
The price of credit has
come down significantly over the last six years, given the 3.25 per cent
reduction in the official cash rate over that time.
House prices
peaked in mid-2017 and have declined by approximately 7 per cent
nationally since then. In Sydney, prices have come down by around 12 per
cent from their peak.
The next rate cut by the Reserve Bank,
which some believe could come as early as May, won’t have the same
impact as it did eight years ago, Mr Oliver said.
“It will
provide some help to stabilise the market. But I don’t think it’s going
to provide the same stimulus as it did in 2011. Household debt-to-income
levels are much higher now. The banks also have much tighter lending
standards than they did in 2011.
The Commonwealth Bank has provided an update on its business plans and has said it is committed to the exit of its wealth management and mortgage broking businesses; via InvestorDaily.
The update follows last week’s release of the bank’s full response to
implementing the recommendations from the Royal Commission.
While CBA remains committed to exiting the wealth management and
mortgage broking business it has suspended these plans in order to focus
on the priorities of refunding customers and remediating past issues.
Over recent years, the bank has spent $1.46 billion on or provisioned to address refunding customers including $1.21 billion relating to the wealth management business.
The $1.46 billion comprises of over $600 million already paid to customers or provisioned to address issues relating to advice quality, fees for no service and banking fees and interest.
The program costs and processes of this work has cost the bank $650 million and another $200 million has been provisioned for wealth management related remediation issues and program costs, including ongoing service fees charged by aligned advisors.
Editors note: Post updated from millions to billions (source was incorrect).
Westpac chief executive Brian Hartzer has denied claims that Australian employers are offered special deals from the bank if BT becomes the default superannuation provider for employees, via InvestorDaily.
Appearing at the House of Representatives Standing Committee on
Friday, Mr Hartzer was questioned about the major bank’s superannuation
offering through BT Financial.
Labor MP Matt Thistlethwaite asked the Westpac CEO about reports that
employers could be prosecuted for the underperforming retail super
funds that manage staff retirement savings.
Mr Thistlewaite referred specifically to a 21 January news article in The Australian that noted Westpac’s BT super fund was one of the worst performing super funds in the last seven years.
“The article points to ‘bundled services’ for the business behaving
employees in your BT retail fund. What are those bundled services?” the
MP asked.
Mr Hartzer said he was not familiar with the news article.
“I’m assuming that bundled services means you provide concessions to
the employer on other banking products for bringing them into BT’s
fund?” Mr Thistlethwaite said.
Mr Hartzer replied: “We checked quite closely and that is not our
practice. The corporate super that is offered up is meant to be on a
competitive basis for the services provided. We don’t provide
inducements in terms of banking.”
Concerns over the relationship between retail super funds and
employers were raised by the Productivity Commission in its report into
the superannuation sector. Released in January, the report recommended
the creation of a ‘best in show’ list of funds for employees to choose
from.
In December last year, The Australian reported that ASIC
commissioner Danielle Press said the regulator would crack down on
employers who placed employees in poor-performing funds in exchange for
“bundled services” that were provided to them by the banks and finance
companies that owned the funds.
“We’ve got to look at the role of employers in the default system and
how they are making their decisions on what funds are their default
funds,” Ms Press told The Australian.
“At the end of the day, consumers are disengaged. There’s no
obligation on employers to make that default choice in the best interest
of their employees.”
