Speaking at the Association of Superannuation Funds of Australia conference in Perth, Tria Investment Partners managing partner Andrew Baker unveiled the latest data from the Tria Super Fund Review.
Taking the average total cost facing a default superannuation fund member with a balance of $50,000 (including investment costs, trustee costs and administration costs), ‘large industry funds’ are currently sitting at 99 basis points (bps) – up from 95 bps in 2010.
‘Large public sector funds’ currently cost 73 bps, up from 69 bps in 2010 – whereas retail funds have fallen dramatically from 200 bps to 120 bps.
Taking the ‘new breed’ retail MySuper products on their own, retail funds are now 10 per cent cheaper than industry funds (90 bps compared to 99 bps), he said.
“That’s very concerning for industry funds because that cost pressure has created more space for retail to attack with the new generation products,” said Mr Baker.
“That’s a marketing disaster for the industry fund segment. That allows the retail funds to thoroughly confuse that price positioning, which they will no doubt proceed to do,” he said.
Mr Baker put the fall in the cost of retail funds completely down to FOFA – more specifically, “the unbundling of fees and commission”.
But when he sifted through the data of the Super Fund Review, there was only one not-for-profit superannuation fund that had managed to reduce its member fees over the last year.
“In general, fees are up across the board, and the culprit is really clear: it is Stronger Super costs and operational risk reserve costs,” said Mr Baker.
But despite the failure on the fees front, there are some positives to be taken from the new regulatory regime, he said.
SuperStream has been well received by the industry, and will have a positive contribution “if it works”; and the governance measures being implemented by APRA are part of an “institutional deepening” of the superannuation sector, said Mr Baker.
But there has been very little product innovation as a result of Stronger Super, and if anything, the regulation is “strangling innovation”, he said.
The ‘new generation’ low-cost products put out by the likes of CBA, ANZ and ING are the result of FOFA, not Stronger Super, said Mr Baker.
“The biggest innovations are happening in SMSFs – perhaps not surprisingly because they haven’t been bogged down by Stronger Super for two years,” he said.
“Stronger Super has been an expensive, difficult experience with a lot of [APRA-regulated] funds saying ‘What’s come out of this?’” he said.
