Royal Commission reveals details on dodgy super fees
As the superannuation round of the Royal Commission kicks off, further details about super members unknowingly being charged fees for no service by MLC have emerged.
Former NAB executive Paul Carter fronted the Royal Commission on Monday to explain why MLC continued to deduct plan service fees from its MasterKey Personal Super (MKPS) member accounts, when many of them had no link to an adviser, and some of the poor disclosure around these fees to consumers.
In a recent ASX statement, MLC’s trustee Nulis, stated it would stop deducting plan service fees from MLC MasterKey Personal Super (MKPS) member accounts from 30 September 2018, and that it would refund all MKPS members for planned service fees paid while in the product.
MLC Super chief executive Matthew Lawrence explained the fee was being refunded because MLC did not clearly communicate to MKPS members that the fee could be turned off if they no longer wanted access to general advice.
Mr Carter admitted to the commission that the planned service fee was for access to advice and support services and not necessarily for the provision of actual financial services that had been provided.
Senior counsel assisting Michael Hodge questioned the justification for charging members a plan service fee, which accounted for 1.5 per cent of their account balance, where they were not receiving actual advice services for these fees.
Mr Carter told the commission that MLC concluded that removing the fees would be “breach of contract by the trustee” and would likely see advisers move their clients out of the fund.
“It is highly likely that members and the amount of assets in the fund would be reduced because the advisers we were dealing with would be dissatisfied that we knowingly breached a contract,” said Mr Carter.
“It is in that context that the trustee agreed that by continuing grandfathering and not having clients move elsewhere the super funds maintaining funds that it was in the best interests of members.”
Mr Hodge was sceptical of this reasoning given that Nulis didn’t have any contractual arrangements with advisers, and it was a different MLC company that had contractual with advisers.
Mr Carter also stated that MLC sought legal advice about charged the plan service fees to ensure it was legally permissible to do so and that is “proactively engaged the regulator” on the issue.
While ASIC did not provide approval on the fees, it did not express concern Mr Carter stated.
Mr Hodge also asked Mr Carter about why the ability to switch the fees off or negotiate the fees with the adviser was poorly communicated to members.
Mr Carter conceded that the wording in the reference guide “could have been enhanced”.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.