Super fees are simply too high

Australia’s superannuation fees have been found to be “high” by global comparison, and the standards of competence of financial advisers disparate in our nation, two of the largest issues facing our banking and superannuation industry according to a new report.  And it has us questioning whether we are being unfairly harvested in Australia by opportunistic institutions who see super and wealth management as a cash cow without much concern for the results they achieve.

The Murray Interim Financial System Report which has been commissioned by the Australian Government was released yesterday, and raised concerns that Australia’s superannuation funds have some of the highest operating costs among the Organisation for Economic Cooperation and Development’s member countries.

“There is little evidence of strong fee-based competition in the superannuation sector and operating costs and fees appear high by international standards,” it said. “This indicates there is scope for greater efficiencies in the superannuation system.”

Banks and super companies are keenly eyeing the ageing population challenges facing the economy, and recognise the scale of the 1.8 trillion dollar opportunity that superannuation has become, a multiple of 7 times what it was when the the last financial industry enquiry, The Wallis enquiry, took place in 1996.

This set of results comes hot on the heels of controversy from the Commonwealth Bank, who have been found to have provided poor financial planning advice to some clients between 2003 and 2012, losing their customers hundreds of millions of dollars after planners put their clients’ money into high-risk investments without their permission.

In fact, the inquiry raised the possibility of an enhanced public register of financial advisers that includes their credentials, as well as a national examination for planners offering personal advice.

The Murray Interim Report also considered that it may be appropriate to try and encourage superannuants with incentives to try and entice them into products that offer greater longevity risk management, like annuities rather than managing their lump sums.

Finally, in some corners of the media today there is suggestion that the Government should introduce a low cost default superannuation fund that will provide an option to those who resent the high fees.  Apparently in latin countries where this has been done it drove the cost of Superannuation style funds down up by to 65%.

So what do you think… Should we put pressure on superannuation funds to bring prices down? Should we have a register of Financial Planners in this country and a national examination to qualify them?  What worries you about our financial services sector as it is currently evolving?