So, another day, another retail superfund disaster for its members.
This time, one of Australia’s biggest retail superfunds, Colonial First State (“CFS”), has settled a class action filed by Maurice Blackburn Lawyers on behalf of around 100,000 CFS members. While admitting no wrongdoing, CFS agreed to pay $56.3M (about $563 each) to the aggrieved members. The basis of the action was that CFS failed to implement a switch out of high fee accounts with low investment returns quick enough. This affected some members who were left paying trailing commissions to originating financial planners for no service, possibly due to historical CFS dealings which prioritised the sales force (planners) rather than the members.
Now, this blatant breach of ethics is nothing new in retail super – if you recall, there was a recent Royal Commission on the quagmire. Also, the structure of the industry pretty much guarantees that this type of malfeasance will continue indefinitely. But, there are several important points to note here:
That last point is worth re-reading & reflecting upon. Can CFS use other member balances or raise fees thereon to pay the settlement amount? If CFS is insured against this risk, what will be the hike in premiums going forward on that policy to continue to provide protection and will long suffering members have to fork out those increased premiums and if so, for how long? Or is there some “contingency reserve” sitting on the balance sheet of either the CFS “master trust” or whatever management company was responsible for this debacle?
Regardless of the answers to these important questions, the point is this; to exit this swamp, ALL CFS members should consider establishing a low cost self-managed superfund.
Call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your options.
NOTE: the above is NOT personal financial advice. Solve is NOT a financial planner is not holding itself out to be one. Solve Accounting is a low cost, fixed fee for service SMSF administrator which operates wholly within the rules outlined in ASIC info sheet 216.
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