Cheap commoditised products won’t help members: CIFR

The Financial System Inquiry's (FSI) push for low cost commodity products under the MySuper regime is at odds with the superannuation industry's intention to tailor products for members.

That is the view of Centre for International Finance and Regulation research director Dr Geoff Warren, who said the FSI's push for lower fees and cheap products, fails to take into account the issue of whether members receive value for the fees.

"The fees are partly high because of the structure of the system we've got in Australia, which is almost a Rolls Royce one where we've got lots of things in there like insurance and choice, lots of product offerings, lots of regulation and so on, and all these things are costly and that pushes up the cost structure," Warren said.

"The problem with the FSI is just focusing on fees per se isn't the right thing. You need to focus on whether when you spend money, if you're getting something worthwhile for it."

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The comments come after the CIFR released a report last month analysing the progress of MySuper, and discussed the FSI's call for a formal competitive process through tenders and auctions if a 2017 review of the system fails to find big improvements in efficiency and competition.

Warren is not convinced the FSI's call for a cheap commoditised product with four or five products delivered to everybody at a cheap rate, will deliver the best results for members.

He favours the idea of having slightly more expensive products that are more tailored to the individuals' circumstances.

"Certainly what I'm saying is that's the way the industry was moving. They each tailored to their own specific member base," Warren said.

"Remember these vary quite a lot across funds. So you end up with lots of different MySuper products in part because the member bases of all funds are all different."