The proposed government requirement to provide superannuation fund members with full disclosure of fees paid to managers and consultants would be nearly impossible to comply with because of the many layers and forms payments can take, according to SunSuper chief investment officer David Hartley.
"There is all sorts of fees in the industry, but if I want to identify all of those fees, good luck, because I think it is almost impossible," Hartley said yesterday at the Conference of Major Superannuation Funds 2012 in Brisbane.
"It is impractical and largely irrelevant because it takes the focus away from the main objective, which is to identify opportunities and to make the best of those opportunities."
He said a disclosure regime should be focused on the net return to members.
"If I'm getting a 40 per cent return from a hedge fund and I pay a 10 per cent fee, that is far better than getting a 5 per cent return and no fee on a term deposit," he said.
The Super System (Cooper) review has proposed that funds will need to disclose a total annual expense ration (TAER), which is defined as a new expense measure derived from the total expenses incurred by a fund or investment option in carrying out all its activities, regardless of whether they are characterised as relating to management, administration, investment or portfolio transactions.
ASIC senior executive leader of investment managers and superannuation Ged Fitzpatrick recognised there were some issues, but said the TAER provided an opportunity to get it right.
"We need to work with the industry about how this is dealt with. We have a real opportunity through the TAER whether to look at whether there is a fundamental need to replace the current arrangements," Fitzpatrick said.
He said ASIC would look at further consultation once the draft legislation about the requirements had been released.
"The TAER is still a matter of great discussion, and we will have great deal more clarity once we've had a look at the tranche of the exposure draft of the legislation," he said.
"It is not simply an issue for the regulator to take a view; it is for the industry to apply in a consistent and effective manner for the member's benefit."
But Financial Viewpoint director Brett Elvish said such a regime had the potential to distort funds' investment decisions because of the way fees would have to be disclosed.
This was particularly a concern where funds were considering bringing management functions in-house to reduce costs, because it would reveal certain fees that were previously bundled into products by manufacturers and were, therefore, undisclosed.
"It would actually encourage outsourcing because all you had to disclose was a consulting fee," Elvish said.
"If a fund were to bring in-house some of the investment management to reduce costs, it would actually increase their fee disclosure and so it would be very hard for a fund to do that.
"More information is not always better information and we need to focus on what we are paying a fiduciary."
