Managers of Australia’s superannuation funds agree new industry standards
The new standards, or Superannuation Member Charter as it is called, is being described as a significant development for Australian consumers, who are major holders of investment funds compared with other nationalilties. This is because of a government-organised pension scheme that obliges Australian employers to pay a percentage of each employee’s salary into a so-called superannuation fund, for the individual’s eventual use when he or she retires.
In part as a result of this scheme, Australia is home to the world’s fourth largest funds industry, despite having a population only 1/14th that of the US, the No. 1 fund centre by assets under management.
The new charter will apply to the purchase and holding of new products only, rather than to existing superannuation accounts.
“Australians can now ‘turn on’ or ‘turn off’ financial advice fees in their superannuation and negotiate advice fees [in such funds] with their adviser,” said Investment and Financial Services Association (IFSA) chief executive John Brogden.
Brogden said the new charter, which may be found on IFSA's website, represented “the start of a new era of consumer empowerment”.
“Critics said we would fail to deliver, but today’s announcement shows how an industry focused on the long-term financial well-being of Australians can achieve tangible results for consumers,” Brogden said.
The formal endorsement of the new charter by IFSA's 135 member companies, which look after more than A$1trn on behalf of more than 10m Australians, came after a seven-month consultation period.
The charter is due to come into force by July 2012, after a two-year transition period, but IFSA said many of its members have said they will begin to implement it before the transition period officially begins on 1 July 2010.
“With the charter now ratified, IFSA members have begun the process of unbundling advice and product costs to empower consumers with greater choice and control in how they pay for financial advice,” IFSA said today.
Brogden said Australians would be able to save up to 25% on fees under the new standards, even though recent research showed fees and charges in the largest Australian superannuation funds to be competitive already, by global standards.
Among the elements of the new charter:
• Superannuation fund members must agree in advance to the amount they are to pay for the advice they receive (a "member advice fee" or MAF), and how their adviser is to be paid
• Superannuation fund members will have the ability to stop paying their adviser if they wish to end the relationship
• Superannuation fund members will not be asked to pay for advice they do not receive
• Superannuation fund members will have access to online performance information every quarter, to allow them to compare the past performance of their investment options with other 'like' options.