Passing the buck on who’s to blame – Cbus has to do better than this

Cbus chief executive Kristian Fok appears via video link during a public hearing of the economics references committee. Picture: YouTube

The Cbus super fund, under fire for alleged delays of payments to vulnerable investors, is not going to dig itself out of this corner by blaming someone else – though unfortunately this was a key line of defence from CEO Kristian Fok at Thursday’s Senate hearing.

The $94bn fund used Link Administration Group to handle its insurance claims.

Fok said: “The delays are unacceptable but we’re not withholding money, absolutely none at all … The delays, as I indicated, have primarily emanated from our administrator. We are still responsible for it.”

Trying to turn the focus on to the people you allowed to run an exceptionally sensitive part of your business is not going to restore the fund’s reputation anytime soon: the buck stops with Cbus top management namely, Fok and chairman Wayne Swan.

Yet Fok went on to spell out how unhappy he was that the Link group pointing to issues to do with staff turnover: “We had experience with the administrator, a large amount of turnover, and need to uplift on training; there’s been quite a lot of actions we’ve had to instigate.”

Bound by client confidentiality, Link chief Vivek Bhatia on Thursday would not comment on the accusations.

But here’s something that might have been mentioned.

Only last month when the international ratings group Morningstar downgraded the “parent view” rating on Cbus from average to below average, the report specifically spelled out “continued elevated turnover across Cbus senior investment team ranks”.

“It is hard to view Cbus for its culture or ability to retain key talent as things stand,” said the report.

Talk about double standards.

There are now two major issues forming around the Cbus scandal.

First, for Cbus the question is whether it can quarantine the cock-ups in its administration from its reputation as an investment manager. The fund has managed conventional investment returns on par with its peers over the past decade – but will this continue?

Second, the scandal has highlighted major failings across all big funds – there are already other public examples of big industry funds failing customers: at Unisuper where members could not interact with their accounts online; at ART where members had pension payments delayed for days.

There will be more funds and more failings coming to light in the weeks to come. ASIC deputy chair Sarah Court has already said as much when she warned this week: “We do think this is a broader industry issue.”

In reality, we have let a $3.5 trillion sector become exceptionally powerful, with insufficient channels for the everyday investor to express their concerns. The list of problems around poor behaviour at big super funds has come largely from media reports.

ASIC took the major step of suing Cbus this week because in terms of asking nicely, the regulator had clearly reached the end of the road. In this regard there are very strong parallels with the way regulators got fed up with dealing with bad behaviour at the big banks before it all ended in the Hayne royal commission.

Of course banks could always placate top shareholders to keep things on an even keel, Big super funds can’t do that. Cbus has 930,000 individual members and they will not be happy with what they have been hearing.