PC chose politics over member best interest

The Productivity Commission (PC) has been accused of developing a report aimed at addressing political issues but totally disregarding the best interest of members of superannuation funds.

Financial services business broker, Paul Tynan has dismissed some of the core findings of the PC’s report into the competitiveness and efficiency of the superannuation industry and particularly the suggestion that a body should be formed to select the top 10 funds.

“I have worked in the superannuation and investment industry for over 40 years and its ‘Common Sense 101’ NOT to engage in picking winners,” he said. “Picking fund performance winners has so many different variables.  Investment funds have different investment styles, asset allocations, benchmarks, research, trading methodology, currency policy, ethical policies, governance policies and access to listed and unlisted investment assets. Comparing the returns of one balanced fund to another is like comparing apples with oranges.”

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Tynan said that while he agreed that pressure needed to be applied to underperforming funds to make them more accountable to their members, it was up to the industry associations, regulators and the Government to apply pressure for them to merge.

“Trustees are legally obliged to act in the best interests of members, but why isn’t this being enforced,” he asked.

Tynan said that the Australian superannuation system was recognised worldwide as being progressive, but had not received a report based on selecting winners for political reasons – something which he believed was simply bad public policy.

“At a time when financial advice has never been more important to Australians, the number of consumers that can afford/access advice is in decline due to mounting costs, regulation and client affordability. Simultaneously, the need to access advice, particularly in the area of retirement and debt management continues to increase dramatically and will escalate even further in coming years.”

“Hence the need for Australians to be financially literate as knowledge will assist them to take responsibility for their own superannuation assets,” Tynan said. “Unfortunately, self interest groups with loud voices continue to dominate the debate and influence policymakers at the expense of the long-term sustainability of the financial services sector – and in turn the well-being of Australians and the economy.” 

 




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Spot on Paul.

Superannuation is the political football that everyone loves to have a kick of.
So many commentators, media, super funds controlled by unions expectations of "donations", advisory bodies with either obvious or hidden agendas, politicians with no real world experience making legislative decisions based on retaining power and vulnerable consumers being swayed by misinformation.
Paul is correct...there is way too much white noise confusing consumers.
The ridiculous assumption and constant message that the cheapest super fund (ie lowest fees) will be of benefit to a member is negligent.....if you had to have a serious operation, would you choose the cheapest surgeon you could find, or would you feel more comfortable with a surgeon who knew their profession very well, came highly recommended and was remunerated fairly, but well for their expertise ?
The other unfortunate problem is that a vast number of people are lazy, uninterested and just want something to happen without paying much or putting in any time or effort themselves.

Good points, particularly the last paragraph.

Is there anyone here commenting on or viewing this site that cares what your opinion is Hedware.

Good point! Good point! - yeh thanks mate like your tick of approval carries anything other than self-indulgent virtue signalling.

I look for Hedware - he is my reference point for a fool. Trouble is I suspect he is in a position of influence - which makes perfect sense.

You've hit the nail on the head Paul.

Superannuation is simply a trust structure which is allowed concessions by the Government to encourage people to save for retirement. There will always be different product offerings with varying key features and costs; just like any other product that consumers purchase. Let the market forces determine which way people choose.
Regarding advice, we need to work out a way that it can be delivered professionally without having to provide a Statement of Advice running into 50 plus pages most of which are rarely read. The saving in the expense of paper alone might be one small step forward in reducing the cost of advice.

And those of us using Platforms and say 12 managed funds have to give the NON TECH SAVY client (the one who does not have a computer) about 10 cms thick of PDS's and which he, the client, NEVER reads!

In my case I do charge a reasonable fee upfront and for ongoing services and leave far behind the investment performance (with little risk ) of most (usually all) Retail and Industry Funds. My clients would be appalled at having to drop my services and use a nominated Fund chosen by some Panel of "brilliant" Advisers, doubtlessly belonging to a Group Chaired by some rejected ex politician. No names but there is at least one such in the Industry Funds Sector if not dozens and what do they know about investing?

Ok I'll bite, how do you outperform the industry/retail funds with little risk? Risk/Reward?

Well, yes, I will give you a few crumbs to bite upon.
By the very careful selection of managed funds and asset allocations. Getting out of e.g. Emerging Countries (etc.) at the right time. Getting out of Funds when the managers are losing the plot due to personal issues. Not investing in Funds run by known very risky Managers. Dropping exposure to top 20 Companies at appropriate times. Dropping traditional managers as they lose their guiding light and do not replace him/her with an equivalent but hope that the Fund name built up over years will carry the day in future for the faithful masses. Not investing in Funds when the Manages boasts that "this is the easiest job I have ever had in my life" (such that he also finds time to work for a Govt Instrumentality). Not using funds prone to illiquidity. Not using funds where no one knows where the money is invested- remember Basis Capital in 2007. Not panicking at downturns but carefully assessing such points of inflection before making decisions. Not ignoring the effects of likely currency trends. Not investing in Funds with extreme PE Ratios or poor interest cover or exceptional internal gearing. Not investing in Funds where the values of assets at purchased date is not changed until the assets increase in value. Has the Adviser seen the colour of the eyes of the Funds Manager? Yes.
If this sounds like active management, yes it is. If it sounds like hard work, yes it is. Are the overall parameters of such portfolios very risky? No, and they are checked. Is the overall strategy for the longer term? Yes, of course. Is the client's attitude to risk considered carefully and matched appropriately? Yes! Is this technique suitable for an Adviser with limited knowledge and experience? NO! Can it be applied to Industry type Funds where members' accounts average about $40,000 each member? NO!

Thank you. I understand what you do broadly. Do run a MDA or Managed account because I get that doing that process across 100+ clients must be difficult.

Good stuff and shows a professional advisor doing the work.
I would add in the need to look of the outlook of the global economies for investment decisions and to look at the major industry groups to consider what will be driving or curtailing their growth for investment. Sort of Graham stuff

Yeh thanks Hedware. A big tick from Hedware - AWESOME!

Agree on your comments re need to drastically reform SOAs. They were a crude device to force some planners to talk to their clients at least once per year. But a better approach is needed.
Paul's comment re trustees is apposite. From the evidence presented at the RC, many trustees were not doing right by their members, particularly those trustees who were also employed by the very banks in which products the fund was investing.

Banks and ISA funds that also have rank vertical integration problems, including conflicted investment selection processes, correct?

Once upon a time the Productivity Commission was staffed by the best and brightest people doing rigorous and impartial analysis. However like a lot of supposed consumer advocacy groups (including Choice & CALC) it has been hijacked by people with rigid ideological viewpoints who compromise their organisation's integrity by tailoring "analysis" to support their personal agenda. Consumers are actually often worse off as a result.

The government and media needs to stop taking any notice of these groups. And in the case of the Productivity Commission (which is government funded) just shut it down.

!00% agree with the article and your comment fgh, and the majority of comments above. However, another possibility is that the PC report was overdue and they were short on time, so gave it to be written by their 8th grade child, for all the intelligence, insight and comprehension it displays.

Why do all advertisements that mention performance always include the Disclaimer "past performance is not an indicator of future performance?"

How often do we see the best performer one year, be the dog the year after and vice versa?

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