Speaking at a forum on governance at the Australian Institute of Superannuation Trustees, Ms Nance said the term ‘best interest’ “gets misused quite a lot” within the superannuation industry.
“I’ve sat on boards for many years. Just about every paper that comes up suggesting that more money needs to spent somewhere, comes with [the statement], ‘and it’s in members’ best interests”, she said.
“It’s almost like a throwaway line that’s often used to justify every single thing.”
Ms Nance also noted issues raised by the Financial System Inquiry regarding feature-rich superannuation with “lots of bells and whistles and everything for all men”.
“There’s nothing wrong with that approach, but some people think to have the opposite approach – which is to have a much simpler structure, much simpler options, much fewer bells and whistles – somehow is not meeting the members’ best interests,” she said.
“I think it is meeting the members’ best interest test. I call it the ‘Bunnings model’ – it is possible to have a product that meets 80 per cent of the members’ needs 80 per cent of the time, and still meet the best interest test.”
Ms Nance said funds that do attempt to meet “every member need every day of the week [are] not necessarily in the collective best interests”.
“I think the best interest test… I think it’s a great feature of our superannuation environment but I also think it’s potentially the most misunderstood or slightly abused concept to sort of justify anything.”
