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”.
I just got a letter today with my refund.
There are two MLC Master Key products, one with fees deducted and one without. Otherwise identical. Just letting you know. An honest adviser (they do exist) would have placed you in the no fee version and charge you whatever it is you agreed for their services, so no surprises.
The Statement of Advice will include full fee disclosure anyway. Blame ASIC for their silly requirements regarding SoAs that make them 50 pages or longer and therefore mostly unreadable.
I been in a MLC master key super fund for 25 plus years did not get much service but was paying the commission and fees
I was charged over $1200 for paying in a extra super to bring my contributions up to the allowable yearly contribution of $25000 in 2012 can that be right
Now we are finally seeing why the banks lobbied Canberra so well to exclude Australian professional Accountants from Superannuation Advice and Financial Planning Advice (refer previous Accountants’ Exemption) and as independent “Gate Keepers” for clients, as the banks were able to charge what they liked (even for no service)! When will we see our Government serve the people rather than the highest paying lobbyists?
How do you know if you are eligible for a refund. Do l have to apply or will l be contacted by them and also what if you have changed funds since. l was in the fund from 2003 to 2016 then left but then re- opened up an account to maintain my life insurance with them. Is it backdated .
Of course all retail funds do this – otherwise how do they pay advisers their promised trail commissions??
And still no rough pineapple for the ISA funds who strip fees ad hoc everywhere they can. This RC is sounding more biased everyday, or else this publication & it’s affiliated publications are if they’re not reporting it in full.
I contacted MLC a number of years ago questioning the fees for a service I wasnt receiving and was given the run around,
Same here…