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New questions on APRA’s performance test methodology

Mike Taylor1 September 2023
Off target

ANALYSIS

The fact that only one MySuper product failed the latest Your Future, Your Super performance test would suggest that it has achieved its primary objective – identifying the removing underperforming superannuation products.

Evidence is of this is the fact that the one choice product to have failed the test, AMG Super MySuper is now not only closed to new clients, it is now in the process of being closed.

Acclaim Wealth announced the product would be closed to existing members after review process.

“After a review of the MySuper offer, which makes up less than 10% of our portfolio, Acclaim, in conjunction with our trustee, Equity Trustees Superannuation Limited (ETSL) has decided that closing AMG MySuper will provide the best outcome to members,” the company’s statement said.

“We are working closely with ETSL to ensure members invested in the AMG MySuper option receive the best outcome following the termination of the option.”

However, Colonial First State (CFS) has proved that the failing the performance test is by no means a death sentence for superannuation products, with the company having turned around the performance of a number of its products.

The company’s group executive, Distribution, Bryce Quirk then distributed an e-mail to financial advisers pointing out that the following products had passed muster:

  • FirstChoice Employer Super
  • FirstChoice Wholesale Personal Super
  • FirstWrap Plus Super
  • Essential Super

But while CFS celebrated the outcome, major industry superannuation fund, Australian Retirement Trust (ART) held its hand up to acknowledge that one of its products – the QSuper Socially Responsible option had failed” and that it would be closing the option.

However, the extension of the performance test to choice-based “trustee directed products” and the fact that 96 of those products were deemed not to have meet test benchmarks suggests that extending the performance test from relatively simple MySuper products to advised choice products will be no simple task.

As one financial adviser reader of Financial Newswire stated:

“Very disingenuous for APRA to trumpet that platform (by which they mean Wrap) admin fees are much higher than non platform. APRA’s methodology uses a ridiculously unrepresentative account balance of $50K in its fee calculations. Wrap products with sliding admin fee scales are significantly disadvantaged by this methodology, and in practice there would be few Wrap super accounts with balances so low.”

“ If the calculation was done based on a more typical Wrap super account balance of $500K – $1M, then Wrap admin fees would be much lower in percentage terms. Even lower when factoring in aggregation across multiple family member and investment type accounts, that some Wrap platforms use to further reduce average percentage fees per account.”

Given that the testing of trustee directed products represents a stepping stone to testing the broad suite of choice superannuation products it is clear that one size will not fit all when it comes to methodology.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Wildcat
6 months ago

The system is working? Maybe.

Or is it because they are all benchmark hugging as was predicted before all of this started??

Statistics, Statistics, Lies & more Lies
6 months ago

It seems it’s possible an Investment option fails purely on the APRA most likely inflated 0.54% Wrap Platform Admin fee ?
Is this correct ?
Let’s say the clients real Wrap Admin fee is 0.27% (as their balance is $500K) but with the ASSUMED APRA Admin fee being double that.
Can that make the Investment option fail ?

factchecker
6 months ago

Given this year’s new entrants, the trustee determined products, had a first up fail rate of around 25%, what can we expect when all retail options, and hopefully retirement options too, are laid bare. A failure tsunami I’m wagering. And watch the spinning then!

Pro Industry fund unlisted property Ponzi schemes
6 months ago

Another robo debt system outcome on the way… this is going to fail