Counsel assisting Michael Hodge has said super fund members are “disadvantaged by a lack of financial literacy” and vulnerable to exploitation, flagging several concerns with the industry’s structure.
In his concluding remarks at the end of last weeks’ public hearings on superannuation, Mr Hodge said the evidence heard by the royal commission during its fifth round of public hearings suggested some members were being exploited by their funds.
“Members of superannuation funds, like most beneficiaries, are vulnerable, and in respect of superannuation, many are disengaged and disadvantaged by a lack of financial literacy. They are readily able to be taken advantage of,” he said.
“And the evidence, you may conclude, commissioner, suggests that this has occurred in some cases. In most industries, the forces of competition can be relied upon to minimise improper conduct and effective regulation can be expected to address breaches of the law when breaches occur, however, for superannuation, the disengagement of members, amongst other things, may limit the effectiveness of competition.”
Mr Hodge said the hearings presented six questions for the commissioner to consider:
- Whether there are business structures that limit a trustee’s capacity to meet its fiduciary obligations;
- Whether these structures will require legislative intervention to protect members;
- Whether other relationships between funds and other parties cause conflicts;
- If laws regarding misconduct should be strengthened;
- What can be done to motivate regulators to act promptly; and
- Whether further “structural tweaks” need to be made to ensure clients’ best interests are met.
Counsel assisting’s full conclusion was not presented to the commission during the hearings, but will be submitted in written form by 5pm this Friday.
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