AMP superannuation trustees did not find out about deliberate adviser fee-for-no-service breaches that the company had reported to ASIC until the issue was raised in round two of the financial services royal commission, it was revealed on Thursday.
Rachel Sansom, AMP’s trustee governance director, made the admission after details of the breaches were raised by counsel assisting Michael Hodge QC.
“As you know, there was an issue in relation to … the deduction of adviser service fees in respect of members who did not have advisers linked to them any more?” Mr Hodge said.
“Yes, I’m aware of that,” Ms Sansom replied.
“And when was the trustee first told …that the maintaining of the continued deduction of adviser service fees was intentional?”
“It would have heard about that in hearing two of the royal commission [in April this year],” Ms Sansom said.
And after round two of the hearings of the royal commission, did the [trustee] board then seek information about what had occurred?” Mr Hodge asked.
“Yes, it did,” she replied.
The issue was resolved with ASIC by June 2017, which means the trustees, who are responsible with running the super funds on behalf of members, did not hear about it for around nine months.
AMP super trustees also had problems finding out what actions advisers were taking with members’ money and the issue is still not completely resolved, the commission heard.
Ms Sansom also said the trustees relied on cost reporting for services provided by AMP but did not have the ability to check them.
“We’re getting increased visibility, but one of the things we’re looking to take into account is the different perspectives” of financial advisers who focus on clients, and trustees who are “looking at cohorts of members in aggregate,” she said.
Ms Sansom, in another insight into the relative powerlessness of trustees, also told the commission she personally had tried for over a year to get superannuation management fees reduced and that the company was only now starting to act on it.
As recently as June 2018 further fee-for-no-service when fees were charged to members in employer-linked default funds despite the fact they had left their jobs. Currently AMP has remediations under way totalling about $26 million for recent breaches of its duties to superannuation investors.
Evidence of trustees being left in the dark over breaches and adviser behaviour caused Commissioner Kenneth Hayne to question their abilities to carry out their duties.
“Ms Sansom, just this last matter you’ve raised or has been raised with you, do you consider that the trustee is in a position to fulfil its obligations in light of the information that underpins that breach notice?” the Commissioner asked.
“Broadly, I believe so, but we need to keep working with the parties that we work with to strengthen controls and apply further checks,” Ms Sansom replied.
The Commissioner then asked whether trustees believed other areas of the company were “in truth performing those functions as agreed?”
“To an extent, but it’s not a perfect system,” Ms Sansom said.
The commission heard more evidence of the low rates of return earned on superannuation cash options. One member statement showed that returns on $56,000 invested in cash in 2016-17 earned 0.02 per cent interest in a fund that had returned 0.85 per cent annually for five years and 1.9 per cent over 10 years.
Currently the Reserve Bank cash rate is at record lows of 1.5 per cent and according to Canstar the average savings deposit rate is 1.75 per cent.