Are new super funds ‘inefficient predators’?

super funds

22 August 2017
| By Mike |
image
image
expand image

Some new superannuation funds entering the market are actually “inefficient predators” which should be subject to an extension of the regulatory constraints which attach to the Stronger Super regime, according to actuarial research house, Rice Warner.

In a strongly-worded assessment of the new super funds entering the choice of fund market, Rice Warner said it believed it was time to consider extending part of the Stronger Super regime to Choice products, particularly elements such as the newly-slated “member outcomes test”.

A Rice Warner analysis of the new players entering the market in the context of default superannuation suggested many people being enticed into the new products were simply ill-informed.

“The increasing regulation and scrutiny of default superannuation has made Choice superannuation a more attractive target for businesses seeking to profit from superannuation through the provision of superannuation services, investments, administration and advice,” the analysis said.

“Increasingly, Choice providers have engaged in aggressive marketing targeting those, typically younger, members with limited experience of making financial decisions. These members who may only engage with their superannuation briefly to make a Choice of fund or investment then forgo the protections afforded to them in MySuper.”

“There are many new funds (offered by a few trustees) who spend far more on recruiting members than delivering long-term value,” the Rice Warner analysis said and cited the example of a prominent new fund, as a warning of the potential dangers of Choice

It compared the new fund to Australia’s largest industry superannuation fund, AustralianSuper and concluded that people joining the new entity risked being left substantially worse off.

“So, what should be done to defend against these inefficient predators?” the Rice Warner analysis asked. “We believe it is time to consider extending parts of the Stronger Super regime to the Choice products, particularly elements like the newly slated ‘member outcomes test’. Increasing standards of Choice products and ensuring providers act in the best interests of members will ensure that the industry continues to deliver the performance of the past into the future.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 weeks 6 days ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 month ago

Interesting. Would be good to know the details of the StrategyOne deal....

1 month ago

Insignia Financial has confirmed it is considering a preliminary non-binding proposal received from a US private equity giant to acquire the firm. ...

1 week 5 days ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

1 week ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

6 days 19 hours ago