Industry super funds' advertising onslaught 'incomparable'

The industry superannuation funds advertising campaign reached such a level in September and early October that it prompted the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) to question whether the industry funds were really acting in the best interests of their members.

When the industry superannuation funds in 2005 first began their now-famous ‘compare the pair’ advertising campaign, the Australian Prudential Regulation Authority (APRA) was challenged to consider whether the campaign breached the sole purpose test contained in the Superannuation Industry (Supervision) Act.

Given that the campaign had been developed as part of the industry funds’ response to the Howard Government’s choice of superannuation fund regime, APRA was disposed towards accepting the proposition that the funds were acting in defence of their memberships, and that because the advertising expenditure was drawn from fees rather than from member balances, it did not breach the sole purpose test.

APRA even outlined to Liberal Senators sitting on a Budget Estimates Committee the arcane method in which the original campaign was financed with “participating industry funds contributing various amounts to Industry Funds Services Pty Ltd.

“APRA has ascertained that the participating superannuation fund trustees have allocated these amounts from their advertising budgets. The source of funds for the advertising budgets is the administration expense which is charged by the funds.

The administration expense is disclosed to all members of the funds as part of each superannuation fund’s Product Disclosure Statement (PDS). APRA has clarified in its industry communication that trustees could apply a part of fees and charges to advertising.”

So there you have it: APRA gave the green light to industry funds advertising back in 2005 on the basis that the members of those funds would just have to accept that the advertising expenditure was all part and parcel of the fees and charges they ultimately paid.

What is more, it seems clear that APRA has applied much the same rationale to the manner in which the Industry Funds Services pays for the running of the Industry Super Network, which not only seems to oversee the advertising expenditure but is also the industry funds’ lobbing arm.

More than six years later the industry funds advertising campaign reached such a level in September and early October that it prompted the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) to question whether the industry funds were really acting in the best interests of members at a time when superannuation returns are in negative territory.

The inevitable response to the concerns expressed by the FPA and AFA was that the industry funds’ advertising campaign was no worse and no more expensive than the campaigns pursued by the likes of Challenger, AMP Limited or MLC.

However there is a difference. Those publicly-listed companies do not advertise via a conduit such as ISN – and the shareholders of Challenger, AMP and National Australia Bank can, if they have enough time, determine the advertising and marketing spends of those companies by examining the balance sheets appended to their annual reports.

When APRA in 2005 set down the ground rules for the ‘compare the pair’ advertising campaign, it is unlikely to have conceived of the amounts which would be spent in the succeeding six years - or the structures and salaries which would evolve around that spend.