Industry super faces challenge over ad claims

Claims that union-backed industry super performs better than retail funds will be tested under new rules.

New fee disclosure rules will undermine industry super fund claims of superiority, a survey suggests.

Union-backed industry super funds, which have run major promotional campaigns on the back of superior performance and lower fees, will be severely tested under new disclosure rules, an industry survey suggests.

The research, from robo­adviser Stockspot, suggests new fee disclosure rules will effectively rerate many funds.

“We see advertisements showing really big differences between industry funds and retail funds, but not on our numbers,” Stockspot CEO Chris Brycki told The Australian.

“The difference is insignificant when you look at after-fee performance.”

The report, commenting on the impact of new disclosure rules set to take effect next year, says: “We suspect many industry funds that are currently advertised with investment fees of 0.60 per cent will in fact have total costs of 1 per cent or higher.”

Stockspot says retail super funds and industry funds are virtually neck and neck.

It reports that retail funds have after-fee performance of 8.47 per cent and industry super funds have after-fee performance of 8.53 per cent.

This is the third year the difference between the two fund categories is less than a tenth of 1 per cent.

At the heart of the issue is the way industry funds and so-called retail funds (such as funds from the banks and major insurers) present their operations.

Put simply, industry funds may charge lower fees but then often lose their advantage through lower investment performance. In contrast, retail funds can offer superior investment performance but then invariably jettison their advantage through higher reported fees. T

he end result is that both fund formats show insignificant differences in after-fee performance, which is all that matters to the investor.

The findings are based on annual “fat cat” research on more than 4000 funds from Stockspot — a millennial-focused operator that sits outside the rival factions of mainstream industry and retail funds.

Its report finds that overall, industry funds are most regularly among the best performers — especially smaller industry funds.

In contrast, the major banks dominate the worst performers in the market, with only NAB escaping an unwanted mention among the “fat cats” list, where fees are high and performance is poor.

Two banks among the worst performers in the awards currently have their wealth operations for sale.

Stockspot has isolated ANZ’s One Path division as a “gold” fat cat winner with the biggest number of poorly performing funds. Silver went to Axa/AMP and bronze went to CBA through Colonial First State. The Axa/AMP wealth division is not for sale. The best overall performers were Platinum Asset Management, Legg Mason Asset Management and Ausbil Investment Management.