Financial giants take hit over super fee-gouging fears

More than $350 million was wiped off the value of financial services giants AMP and IOOF yesterday.

Concerns have also been raised that APRA had fallen victim to “industry capture”.

More than $350 million was wiped off the value of financial services giants AMP and IOOF yesterday after they were pummelled by investors becoming increasingly aware of the extent of fee gouging in the superannuation sector and how it has underpinned years of super-sized corporate profits.

Westpac said yesterday it would take a hit to revenue of up to $70m a year by reducing super management fees and offering “simple, low, capped administration fees” on its BT Panorama products.

The move followed reports in The Australian of serious concerns about the banking regulator, including that it had for at least eight years been aware of gouging of super members by Westpac and other major financial institutions, but had failed to take any serious action to stop it.

Concerns have also been raised that the Australian Prudential Regulation Authority had fallen victim to “industry capture”, with most of its executives formerly senior executives with the big four banks, and three of those executives taking up roles with the regulator within weeks of the banking and financial services royal commission being launched in December.

Shares in the $3.17 billion ASX-listed IOOF Holdings slumped 4.99 per cent to close at $8.94 yesterday, while shares in the $10.4bn AMP were down almost 2 per cent.

Shares in Hub24, another ASX-listed superannuation and funds-management company, which has a market capitalisation of $836m, were down 6.53 per cent, with almost $60m wiped from its value, taking to more than $400m the collective losses of the company, AMP and IOOF.

Shaw & Partners analyst Brett Le Mesurier said the BT Financial announcement was “sensational” and that the company was leading the industry closer to its future revenue structure. “The thing the market is trying to come to grips with is how far will the revenue of the incumbents fall and how fast will that happen,” he said.

“The market is taking a reasonably sanguine approach (rather) than a believing approach. To me, this announcement looks like a step change.”

The royal commission yesterday released its witness list for its upcoming hearings on superannuation, to run for two weeks from August 6. However, in a move labelled “extraordinary” by one analyst, the commission has not called for Westpac to give evidence, despite the bank being engaged in wide-scale gouging of super customers, and the commission calling the wealth-management arms of each of ANZ, NAB, CBA, AMP and IOOF.

The commission has also called seven so-called “industry” funds, including AustralianSuper, Catholic Super and Sunsuper.

The hearings schedule says the commission will examine how super trustees “fulfil their duties” to fund members, the relationship between those trustees and financial advisers and “the current legal regime and the effectiveness of regulators”.

It has also called on APRA — which will appear before the royal commission for the first time — and corporate watchdog the Australian Securities & Investments Commission, which are responsible for policing the $2.6 trillion super sector, but which have both failed to call out or to rectify systemic gouging of the nest eggs of millions of Australians who have invested their super in retail funds.

The two regulators have been called to answer questions about the “effectiveness of superannuation regulators”. Unlike the other three “big four” banks, which are all in stages detaching themselves from their scandal-hit wealth management arms, Westpac, which runs BT Financial Group, has said it will stay with the sector.

Through BT, the bank has extracted billions of dollars in recent years in fees and charges, much of that from the superannuation accounts. “BT is committed to making wealth management simpler and more transparent for advisers and customers,” BT chief executive Brad Cooper said yesterday.

Additional Reporting: Michael Roddan

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