The sole purpose test sometimes seems more like a guideline than a law, and super funds have long enjoyed its less than definitive language and the regulations that come with it. For example, funds often claim that that advertising is automatically in members’ best interests because it attracts more members, creating greater economies of scale and lowering fees.
Many super funds called before the standing committee on economics have refused to provide information on their advertising campaigns due to the confidential nature of commercial arrangements, while others have claimed that to do so would not be in member’s best interests as it could give their competitors an edge.
These would be good reasons to not disclose spending if they were backed by analysis that demonstrated advertising created a clear benefit to members, or indeed actually attracted them. They often aren’t.
Which leads us to the latest hearing of the standing committee on economics, where APRA – in between hemming and hawing about skyrocketing house prices – said that it was working to determine exactly how super funds justified spending member money.
“That is a focus of our current inquiries, which is to understand the analysis that is being done to support advertising in the first place, then the assessment and monitoring of how those benefits to members actually flow through into outcomes over time,” said APRA deputy chair Helen Rowell.
“I think it’s fair to say that if we are going to find anything in our work, it’s that that analysis and evidence is probably not as robust as it needs to be.”
Of course, most of the advertising that’s drawn Tim Wilson’s ire takes place through Industry Super Australia (ISA) – which isn’t an APRA-regulated entity – rather than the funds themselves, meaning they merely have to justify giving money to an industry body (probably defensible) rather than actually producing those slick ads featuring Greg Combet’s mug.
On top of that, most arguments against super fund advertising assume a sinister motive. While there are doubtless a few funds trying to advance their own interests, most would probably prefer not to spend millions on TV spots and would put the money elsewhere if they had a good reason. Clearly they think it’s working.
APRA – in form befitting an Australian regulator – did not specify how it plans to crack down on advertising, while the new best financial interests duty in the Your Future, Your Super (YFYS) reforms looks to contain the same loopholes as the existing laws did. That does little to answer the question of whether advertising is truly in members’ best interests. It’s the ultimate super fund black box – and it’s time somebody had a look inside.