Hostplus super fund defends wining and dining bosses

Industry super fund Hostplus says it needs to spend members’ money wining and dining bosses so it doesn’t lose contracts.

“I wish I didn’t have to do it. But the reality is it is a competitive landscape,” says David Elia.

Big industry super fund Hostplus spent $260,000 of its members’ money wining and dining 120 chief executives and employer representatives at the Australian Open this year — a move its chief executive today told the financial services royal commission was necessary to ensure bosses didn’t take default super contracts away from the fund.

The prudential regulator has investigated the spending of Hostplus chief executive David Elia, including free tickets to the tennis for his wife and children and his personal use of frequent flyer points racked up through travel for the fund, the commission heard.

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Mr Elia, who heads the best performing fund in the country on a one, three, five, seven, 10 and 15-year basis, faced questions today on how the fund spent member money to lubricate relationships with companies which had the discretion to cancel their deals with the $40 billion super fund.

He also defended the $40,000 laid out on tickets at Melbourne’s Etihad Stadium in April and a lunch at the city’s top-tier Chinese restaurant Flower Drum in December.

While Hostplus is not a corporate sponsor for the Australian Open, unlike National Australia Bank’s superannuation arm MLC and rival Big Four bank ANZ, Mr Elia told the commission the fund paid for about 120 employers to attend the “national event” which he considered the “flagship entertainment event” the fund did each year.

He said told the commission that “unashamedly, unashamedly we utilise entertainment, corporate hospitality in order to strengthen the relationship we have with our employers”.

“I wish I didn’t have to do it. But the reality is it is a competitive landscape,” Mr Elia said.

The fund was always at risk of having default fund status taken away by employers and given to other, higher cost funds, including ones run for profit by the banks, he said.

Mr Elia recounted that Hostplus lost a contract with one of the largest hotel chains in the country because it did not have a relationship with its chief executive.

“You need to do that. Remember they all have banking relationships as well. They’re being pressured,” he said.

“I don’t like the fact that we lose default fund status or employers to lower performing funds or higher fee paying funds.”

Mr Elia said the money came out the fund’s $1.50 a week administration charge, not members’ investments, which worked out to about 1c a week per member.

“It’s not an insignificant sum of money,” he said “You’re 100 per cent right. But it’s done for the right purposes.

“I’d prefer not to do it, but in the competitive world that we’re operating in. I wish I could cut, we’re always looking at ways we could cut our marketing costs, but under the threat of opening up of the default system, relationships are going to become incredibly important in retaining default fund status,” Mr Elia said.

“I would love nothing more than to have certainty about our member demographic and about employers staying with Hostplus but I can give you plenty of examples where Hostplus, despite the fact that Hostplus is the best performing fund in Australia, despite the fact Hostplus has the lowest fees, we have lost employers.”

Eloise Dias questions Mr Elia in the royal commission.

Counsel assisting the commission, Eloise Dias, put it to Mr Elia that the Australian Prudential Regulation Authority expressed concern about his spending, including the free Australian Open tickets for his family and his travel.

“There was an anonymous whistleblower complaint that was made, in August or September of last year, and subsequently again I think in January this year,” Mr Elia said.

He said that he had since stopped collecting frequent flyer points from travel racked up on the company card.

Mr Elia also told the commission that, as part of its preparation for the hearings, the fund in the past month decided to review every single low-balance member who has chosen to remain in the fund rather than transfer their balance to the Australian Taxation Office to make sure staying is in their best interests.

Measures Hostplus used to try to keep the low-balance members included offering them the chance to win movie passes, documents tendered to the commission show.

Mr Elias admitted that a letter to members telling them that “under government regulation, your Hostplus super account will soon be closed and the balance transferred to the ATO” was “sloppy”, but denied it misled people into thinking they would lose their super.

“I don’t think it’s misleading. I think it’s sloppy, to a large degree,” Mr Elia told the commission. “We should be getting much, much better at this and much more precise. We need to be a lot more precise in relation to the way we articulate the messaging,” he said.