Industry super funds' research crumbles under scrutiny

While Industry Super Network has made considerable gains against the financial planning industry in its campaign against commissions there remains increasing concerns about the credibility of the research and ratings upon which its claims are based.

1. Industry Super Network

While the Industry Super Network ISN’s methods in fighting the war against financial adviser commissions have long been questioned by the financial planning industry, the matter was recently taken to Federal Parliament.

The Federal Opposition directed the questions towards two corporate regulators about the assessment of some of the prudential and legal risks the “Compare the Pair” advertising campaign carries, after which the Australian Securities and Investments Commission has agreed to review the popular campaign.

Meanwhile, at the Association of Financial Advisers national conference, the ISN chief David Whiteley declined to specify precisely how much his organisation and its industry fund constituents were spending on television advertising.

2. APRA/MTAA

Earlier this year, Liberal Senator David Bushby asked the Australian Prudential Regulation Authority (APRA) a series of questions relating to problems associated with MTAA Super, including the regulator’s decision to appoint a special counsel and whether APRA had sufficient resources to conduct investigations.

Instead of answering the questions, APRA cited section 56 of the Australian Prudential Regulation Authority Act 1988, which it said precluded it “from disclosing information disclosed or obtained under or for the purposes of a prudential framework law and relating to the affairs of a regulated entity”.

After effectively avoiding answering questions about MTAA Super, APRA was reminded of its accountability to the Parliament, which oversees the role of regulatory bodies; however, the answers were not provided. 

3. CHOICE

Consumer group CHOICE was another one of the harshest critics of commissions and asset-based fees. However, CHOICE’s secrecy around its relationship with One Big Switch was widely criticised, and some even called the group hypocritical.

The criticism centres on the apparent double standard of CHOICE receiving referral fees, and not disclosing the full details, after it was critical of the financial planning industry’s lack of transparency.

Eureka Financial Group managing director Greg Cook pointed to the group’s “partnership” with One Big Switch – something which, while not publicly disclosed, “indicates some kind of financial relationship.” 

4. MF Global

On 25 October 2011, derivatives broker MF Global reported a $191.6 million quarterly loss as a result of trading on European government bonds. 

Not long after this announcement (which was preceded by a number of other incidents), the company filed for Chapter 11 bankruptcy.

The collapse of MF Global affected a number of Australian companies, including MF Global Australia, MF Global Securities Australia Limited and Brokerone Pty Limited.

The Federal Government said MF Global’s collapse highlighted the need to strengthen client money protections, announcing it would consult with the industry on regulations around over-the-counter derivatives

5. Praemium

Platform provider Praemium had taken longer than anticipated to gain the desired scale in its Australian and UK operations over the past couple of years.

The company reported a loss of $5.7 million last financial year, which was an improvement over the previous 12 month period when it reported a loss of $10.9 million.

Praemium announced two capital raisings between December 2010 and February 2011 which would fund the improvement of the company’s financial performance.

The decision to raise capital also follows the resignation of founder and former chief executive Arthur Naoumidis in early August, who is still involved with the business as a consultant to new chief Michael Ohanessian and the rest of the Praemium board.