Superannuation cost "blow out" needs control

Superannuation cost "blow out" needs control
- Heron Launches Vantage

The increasing fees being imposed by traditional Superannuation Consultancies means the majority of superannuation funds could reduce costs by around 20%, according to The Heron Partnership.

Heron believes many funds are looking for a circuit breaker to the spiraling costs of employer-sponsored superannuation and also need to improve corporate governance. Chris Butler, Managing Director, The Heron Partnership, said a new cost control service called The Heron Vantage Program will "take an aggressive and independent look at all aspects of cost, applying the blow torch in the interests of employers and fund members."

The Heron Vantage Program was launched today against a back-drop of:

1. growing concern by employers and superannuation fund trustee boards about the increasing cost of managing employer-sponsored superannuation,
2. a low investment return environment where costs are subject to greater member scrutiny, and
3. corporate governance requirements that those responsible for their employees super are able to demonstrate that they are operating under a protective umbrella of independence, strictly in the interests of their superannuation members and therefore avoiding issues of potential conflict of interest.

Mr Butler said: "Our market research tells us that employers and trustee boards are disturbed about increasing costs and want to be seen to be operating under a proper corporate governance structure.

"Costs have been spiraling for many superannuation funds".

"This is particularly so when the so called independent consultancy supplies all or the majority of services through its own "packaged" products. This structure clearly has the potential to maximise the consultancy's financial position to the detriment of the fund member and the employer, both in terms of costs imposed and financial risk. There is also the clear potential for conflict of interest within the consultancy business."

Mr Butler went on to say "Corporate governance in superannuation is best described in terms of protecting the interests of superannuation members and the concept of "separation of powers" in evaluating and managing membersâ?? superannuation.

"Good corporate governance means that the costs associated with the operation of employer-sponsored superannuation must be reviewed periodically to protect the interests of the members. This applies equally to stand-alone corporate funds and master trusts. Employers and trustee boards canâ??t simply put their "head in the sand" and ignore the issue, even if the employer has outsourced their superannuation fund"

Through The Heron Vantage Program overall cost savings of around 20% per annum, for a traditional corporate fund, could be expected, without necessarily changing existing service providers. In addition, ongoing consulting fees could be reduced by up to 30%.

As well as focusing on achieving cost reductions, the Vantage Program also identifies those areas of potential conflict of interest around the operation of the superannuation fund.

Mr Butler said "Adoption of the Vantage Program is a clear demonstration to employees of how seriously their employer is concerned about their interests".

Aligned with the objectives of the Vantage Program, fees payable for the service come out of the savings gained and are capped at a maximum of 50% of the savings achieved in the first year.

Mr Butler said "This service really puts our clients in a win/win position as there is no fee charged for the Vantage Program unless savings result."