SYDNEY, Aug 9 (Reuters) - Australia’s largest pension fund on Thursday defended using members’ money to bankroll a marketing campaign that depicted the country’s biggest banks as foxes aiming to take a larger share of the country’s A$2.6 trillion savings pool.
AustralianSuper Chief Executive Ian Silk, the most senior financial sector executive to appear at the year-long Royal Commission inquiry, said the A$500,000 ($371,050) spent on a TV ad depicting a fox being let into a hen house by a man dressed in a suit, met a requirement to act in the best interests of members.
“The ultimate purpose was to ensure that legislation was not passed,” Silk told the inquiry. “That would diminish the financial outcomes of... AustralianSuper members.”
Australia is the 14th biggest economy but has the third-largest pension pool in the world, showed data from the Organisation for Economic Co-operation and Development.
Managers of some of the largest retirement funds are having their performance scrutinised at the inquiry into financial sector conduct, which has already roiled the banking and funds management industry.
Laws require employers to pay nearly a tenth of wages into a fund that employees cannot access until they retire. But low financial literacy among Australia’s 12 million workers means the choice between a union-backed fund or a higher fee-charging private fund is often made by their employer.
Silk said from 2015 through 2017, lawmakers were considering relaxing legislation that gives unions the right to select industry retirement funds on behalf of workers and instead give that power to companies.
“The miss-selling, the cross-selling, the conflict of interest in particular that would apply through that model ... would see millions of Australians that would otherwise be in higher-performing industry funds, in poorer-performing retail funds,” he said.
While industry funds face criticism for having union representatives without investment experience on their boards, most data indicates retail funds potentially fare worse when taking into account the fees they charge.
The inquiry spent three days questioning executives of the wealth management unit of National Australia Bank Ltd, the fourth-largest bank by market value, over the conflicts of interest that a barrister said drove it to charge thousands of customers for services that were never delivered.
“The approach of NULIS and the other trustees within the NAB Group ... was a failure to act in the best interests of the members, and a failure to prioritise the interests of the members over the interests of the NAB Group,” Michael Hodge, a barrister assisting the inquiry, said earlier in the day.
NAB Chief Executive Andrew Thorburn took to Twitter to apologise after documents submitted at the inquiry revealed the corporate regulator was investigating whether to impose criminal penalties over the matter.
“This week we’ve been confronted at the Royal Commission with examples of where we have failed to serve our customers with honour,” Thorburn tweeted.
“I’m sorry. And my commitment is that we will learn and get better, so we can once again be a bank you respect and trust.” ($1 = 1.3475 Australian dollars)
Reporting by Paulina Duran; Editing by Christopher Cushing