The extended customer services blackout currently in place – in order to upgrade IT systems – means that investors in the $88bn fund have been “imprisoned in the fund”, Longview Capital Partners fund manager Robert Baharian says.
“I cannot see how this fund could not have found a better way to upgrade than to imprison their own customers for nearly two months,” Baharian says.
The deliberate freeze on virtually all member services, halting withdrawals, contributions and insurance claims, means the industry fund has left most customers with an extraordinary lack of transparency.
Moreover, many of the 1.1 million members of HESTA – often health service workers – will not know of the blackout until they go to transact with the fund in the coming weeks.
Advisers describe the HESTA blackout – which began on April 12 and ends on June 2 – as a test case for many other “big super” operators using out-of-date technology system planning to upgrade.
Grant Millar, a specialist financial adviser to healthcare professionals, says of investors who had their insurance paid through the fund: “If your insurance comes up during this period, your insurance will be unpaid.”
To cover investment switches during the blackout period, HESTA has offered a workaround. It has said investment switches will only be allowed through a form which will be processed after June 1 but applied retrospectively from the date the form is received.
HESTA’s move – a change to a technology provider named Grow – is a clear opportunity for self-managed super funds which promote the benefits of control over all aspects of investment.
“We’ve had investors see this as the tipping point to move to SMSF,” Baharian says.
Self-managed super funds have been enjoying a rebound over the past 12 months as big super funds struggled publicly with a string of scandals and mishaps. The most serious issues included the delay with paying death benefits which began with Cbus and later included AustralianSuper. Both funds are facing court action from the consumer regulator, the Australian Securities and Investments Commission.
“We’re continuing to support our members through this period of change as we know that, while in the short-term it may be challenging, this transition will provide the technology platform and data capabilities to better service our members in the years ahead,” HESTA said in a statement.
“While there are temporary disruptions to some services, it’s important to note that members can still receive urgent and critical payments, and switch investments during the limited services period. HESTA’s portfolio remains invested as normal and we continue to publish daily unit prices on our website.
“In relation to investment switching, HESTA conservatively modelled and stress tested our approach, including factoring in significant historical market movements. This modelling indicates a non-material impact on unit pricing.”
According to HESTA chief executive Debby Blakey: “This is the largest technology project in HESTA’s 38-year history and we’re confident it will set our business up to deliver better outcomes for our members.”
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An extraordinary decision by the HESTA super fund to deny access to more than one million investors for seven weeks has raised significant questions about service standards across so-called big super.