‘Gouged’ IOOF super fund chiefs in dual role as trustees

The chief executive and chairman of IOOF super fund have a dual role for the trustee that is meant to protect members.

IOOF managing director Christopher Kelaher. Picture: David Geraghty

The chief executive and chairman of listed financial services giant IOOF, which is accused of trying to gouge hundreds of thousands of members in its super­annuation fund, are also in charge of the entity whose role is to protect the interests of those members.

IOOF chairman George Venardos and managing director Christopher Kelaher, who have both been with the group since 2009, are also the directors of the “trustee” responsible for protecting the interests of the 350,000 super members who hold $26 billion in the group.

The Australian revealed yesterday that almost 100 planners with IOOF’s own planning arm, Bridges, wrote to Mr Venardos and Mr Kelaher on May 2, describing moves to raise its fees to investors as “unfathomable” and “inconceivable”, particularly during the financial services royal commission.

Among a raft of new charges — which Bridges planners said were “quite simply” to “increase revenue to IOOF” — IOOF introduced “exit fees” and lifted its fee for managing simple “cash” ­investments by 33 per cent, for no disclosed reason.

IOOF is in the process of buying ANZ’s “wealth” arm and will manage billions of dollars that people had invested in ANZ OnePath superannuation funds.

Many people signed up as members of those funds before 2013, when changes to the law caused some fees to fall. Those pre-2013 funds are very attractive to financial-services companies because members are paying vastly higher fees for the same underlying ­investments.

An introduction of exit fees makes leaving those costly funds for newer, much cheaper funds less attractive in the short term. But it also delivers fees to IOOF when people eventually switch.

Mr Venardos and Mr Kelaher have declined to comment when contacted by The Australian over the past two days. “Mr Kelaher and Mr Venardos are unavailable for an interview,” spokeswoman Rachel Scully said yesterday.

Under section 52 of the Superannuation Industry (Supervision) Act, super trustees are required to act in the “best interests” of members. The act also states that should a conflict arise between the interests of the super fund members and the interests of the trustee or its directors, such as Mr Venardos and Mr Kelaher, the members must take precedence.

The almost 100 planners who wrote to IOOF management said the company was attempting to “increase revenue for IOOF at the expense of clients” and that raising fees and charges amid the royal commission showed a “complete lack of judgment” and “we would even argue ­arrogance”.

Neither the Australian Securities & Investments Commission nor the Australian Prudential Regulation Authority would comment yesterday when asked whether they would take action, or even whether they considered IOOF was in breach of its trustee duty obligations.

The Australian is not suggesting any wrongdoing or conflict of interest, only that the dual roles require further investigation.

Hundreds of thousands of customers of the company’s $25.8bn umbrella IOOF Portfolio Service Superannuation “platform”, which is regulated by APRA, have watched their investments grow at an average of just 2.1 per cent a year, which is well below risk-free “cash” returns, and even below the rate of inflation.

IOOF backed down from levying several of the new fees on Bridges clients following the backlash, but is levying them on tens of thousands of other accounts, including new “white-label” super products it is now building for ANZ to sell.

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