The royal commission’s public hearings into the superannuation sector began on Monday, with NAB executive Paul Carter in the witness box.
Counsel assisting Michael Hodge pursued a line of questioning about MLC MasterKey’s plan service fee (PSF), which the company announced on 27 July it would be “turning off” later this year.
Mr Hodge established that once a member was transferred from MasterKey Business Super (MKBS) to MasterKey Personal Super (MKPS), they could call up their adviser to agree on a different fee.
“The member has the ability to negotiate that fee directly with their linked adviser in the personal plan,” Mr Carter said.
After establishing that the agreed-upon fee could be “zero”, Mr Hodge asked what happened if the adviser didn’t agree.
“The member is in control, and so the member if they deem that they would like the fee to be zero, the fee will be zero,” Mr Carter said.
However, Mr Hodge said there was an “issue” with the product disclosure statements (PDSs) produced by NAB/MLC – namely, that they failed to explain to members the fee could be reduced to zero.
“One of the issues that we identified was that the disclosure to members about their ability to dial that fee all the way to zero should have been clearer,” Mr Carter said.
“It had language along the lines of this fee can be negotiated between the member and the adviser.”
To which Mr Hodge responded: “You’ve used the word ‘negotiated’, but there’s no negotiation, is there? The member can just say, ‘I don’t want to pay this any more’.”
NULIS, the trustee for MLC/NAB, announced on 27 July that it would stop charging PSFs from September 2018.
“Do you know why it can’t stop charging those fees until September of this year?” Mr Hodge asked.
“No, I don’t,” Mr Carter replied.
The royal commission hearings will continue today. You can follow all of the action on a live blog at InvestorDaily: https://www.investordaily.com.au/superannuation/43410-royal-commission-superannuation-hearings
in some cases i would argue fees should be refunded even when a crappy tick and flick review was completed. I have seen advisers do no change roa five years straight, chat about the weather for 5 minutes and collect 5k per annum. To me this is not much different to not providing a review at all as it provided bugger all benefit and i really dont think clients had the extent of the fees they were paying explained to them.
One of the outcomes should be that Trustees (NULIS in this case) of all super funds be totally independent of the investment arm of the fund ie NULIS should not be owned or controlled by NAB/MLC. Remember the Comminsure fiasco with FAILED terminal illness & TPD claims occurred because the Trustee was not independent of the insurer and failed to act in the best interests of the claiming fund members, most of whom were Comminsure employees. NULIS is conflicted because they are owned by NAB/MLC
[quote=Reality]The fact they devised a strategy to keep grandfathered commissions because advisers would leave otherwise, shows how conflicted they are. Banning them should be a priority with protection for centrelink arrangements etc.[/quote]
There was no “devised strategy” Reality as the grandfathered commissions on pre-FOFA accounts were entirely legal and remain so.
Any suggestion that these fees were illegal, tricky, deceptive or otherwise is entirely wrong.
In fact MLC clearly stated in the 1st Sept, 2012 document titled ” Your move to MLC MasterKey Business Super -Reference Guide that in relation to the Plan Service Fee ” You can negotiate a LOWER fee with your adviser “.
So it in fact invited the member to contact, discuss,negotiate or request a lower fee.
How much more clarity around this matter is necessary??…….I know, what the RC would have liked to see on the front page of the PDS in bold letters is ” CALL YOUR ADVISER IMMEDIATELY AND REQUEST THE FEES THAT YOU ARE PAYING TO THEM ARE REDUCED TO ZERO ”
What exactly would be wrong with the letter saying that (as you suggest in the last line)? NAB was not doing the work for many clients and reducing their fees to zero would have been appropriate! However with reduced bank revenue, this would mean the overpaid and under qualified bank employees would probably have to go.
Nice generalisation about bank staff Jape. Bank employed advisers are not the enemy Jape.
This, and all comments from me, are not aimed at Advisers – bank or elsewhere. It’s the woeful Management you labour under, at every bank, that’s the big problem. J
If you don’t see the problem with the fee being instated automatically essentially on an ‘opt out’ basis, thats an indicator of what is wrong with the industry. Especially when no services are being provided for it.
We complain we are hard done by as an industry then people think that kinda thing is ok… Theres a difference being legal and professional/ethical.
That’s not an unreasonable view to have (and it’s widely accepted now thankfully) but the reality is that this was perfectly legal at the time and had MLC chosen to actively promote or encourage clients to turn off fees then they would have lost a LOT of business from advisers very quickly. There are business consequences for product providers that operate in a two sided market and they walk a tightrope when it comes to market communication.
Yes, there are “business consequences” of all decisions indeed. Having taken one action a while now, NULIS now faces the fallout at the RC.
Wouldnt be legal if the industry did not lobby the govt to water down FOFA. We need RC to reveal the extend of the issues so that wrong doings can no longer be legal.
Just another bank employee with no superannuation credentials or advice qualifications/experience giving evidence as to why their AFSL avoided doing the right thing – the answer to which is just so that they (and the rest of the management team) could continue to receive their ridiculous salaries and even more ludicrous bonuses.
I’m waiting on my refund from my Industry Super Fund, because I never used their intra-fund advice service.
Let’s see if the royal circus ever gets around to ISA funds, or if they run out of time or let them off the hook, like they di previously to First State and to ASIC when ASIC declared they weren’t planning on investigating ISA fund advice. I remain skeptical but hope to be proven wrong.
The fact they devised a strategy to keep grandfathered commissions because advisers would leave otherwise, shows how conflicted they are. Banning them should be a priority with protection for centrelink arrangements etc.