Vanguard said that while issues around the implementation of new performance benchmarks need “deeper discussion and debate”, Treasury should not risk fundamentally altering the measures announced in the benchmark by incorporating proposals from super funds.
“In our view, none of these alternatives are suitable as a robust, appropriate benchmarking approach, and we would strongly suggest that the Government resist representations from industry stakeholders to change the originally-stated benchmarking approach,” Vanguard said in its submission to Treasury on the reforms.
“It is our strong view that a clear, objective ‘bright line’ approach is the best policy framework for the Government to adopt, and that the passive reference benchmark assessment approach envisaged by the Government (and by the Productivity Commission before it) appropriately fills this criterion.”
However, Vanguard warned that the public presentation of the benchmarks – which will be visible through an ATO web portal – could be a commercial detriment to new entrants to the superannuation industry while arguing that it would be subject to “more exhaustive due diligence” as a new entrant than incumbents were.
“From a competition policy perspective, not allowing new or recent market entrants to participate on a reasonably equal footing would be anti-competitive, and in effect lock new entrants out of the large-scale superannuation market for up to the next seven years. This is particularly so in the case of a new entrant that is operating as an RSE licensee (as envisaged by Vanguard for its own superannuation offer),” Vanguard said.
Vanguard also said that while it agreed with the controversial decision to exclude administration fees from the performance benchmarks, the success of the reforms would depend on the degree of “consumer comprehension and engagement” with the ATO portal.
“At a minimum, an accurate depiction of an individual fund’s overall costs – net of both investment and non-investment components – will be critical to consumer’s understanding and confidence in this new public-facing tool,” Vanguard said.
Vanguard has previously signalled its intention to enter Australia’s superannuation market with a low-cost product aimed at stealing market share away from some of the sector’s largest players.
“This is an ambitious plan and it requires us to focus our long-term efforts on opportunities that enable us to better serve direct investors and their advisers,” a spokesperson for Vanguard told InvestorDaily in October.
“We’ve built significant expertise in this space and we think our focus on high-quality retirement strategies coupled with our disciplined, low-cost approach to investing could potentially help more Australians reach their retirement goals.”
