RC: Some super fees are akin to commission

The Royal Commission has continued with its focus on fees in the superannuation hearings, with a key witness for NULIS and MLC/NAB, Paul Carter, admitting that adviser contribution fees imposed by the fund were “best described as a commission”.

Senior Counsel assisting the Royal Commission, Michael Hodge QC, asked if this was because there was no agreement to provide any service in exchange for the fee, which Carter confirmed was the case.

Carter also admitted that there was not oversight “to the extent required” that advisers were providing appropriate levels of advice to members paying the fee.

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In exchange for the fee, members did not receive personalised advice but rather generalised advice such as information on industry trends or insurance arrangements.

If members then want personalised advice, there is an additional adviser service fee imposed.

“The member has the ability to negotiate that fee directly in the personal plan,” Carter said, answering that this could mean that fees of zero were agreed (effectively turning the fees off) in response to pointed questioning from Hodge.

“The intent of a fee is that the customer is in control and they therefore have the ability to turn fees off,” Carter said.

Upon further investigation from Hodge however, it was clear that MLC/NAB did not communicate clearly to members that they could switch the fee off entirely. Rather, the contracts between members and NULIS said that the fee could be negotiated.

Then when legacy products were phased out and members were moved to MasterKey products, their fees were reduced but only slightly. This was automatic and there was no communication to members that they could have got rid of the fee completely just by contacting NULIS.

Hodge pushed Carter on how the automatic deduction of the fees could be “in the best interests of the member”. Carter says that everything was properly disclosed to customers, but it is unclear from that statement how proper disclosure necessarily translates to meeting best interest requirements.

Carter also admitted that plan service fees were charged when no advisers were attached to the member accounts, which resulted in an internal investigation by NULIS. He said that management had operated under “a mistaken belief” that PSFs could be charged just for the online tools and phone advice services available to members, but the fund later found that this was not a sufficient level of advice in exchange for the fee.

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