Insignia Financial and Colonial First State, owners of two of the nation’s largest retail super funds, ceased their membership of the troubled Association of Superannuation Funds of Australia in recent months.
A spokesperson for Insignia confirmed the company – formed by the mega-mergers of IOOF, MLC and ANZ Wealth – was no longer a member of ASFA. A spokesperson for CFS – which is owned by private equity investor KKR and the Commonwealth Bank – said it had also ceased to be a member of ASFA within the past six months.
Both declined to comment further, but senior industry sources said the moves were chiefly motivated by consideration of the best financial interests duty, which was introduced by the previous Coalition government. Under the enhanced duty, funds must proactively justify every dollar of expenditure, including on marketing, political donations and industry association memberships.
Other sources cited concerns around the costs associated with being a member, including rising fees for attending ASFA’s annual national conference, which is being held in Adelaide next week. At the time of publication, tickets to the conference cost $4,050 per person for a member and $5,630 for a non-member.
ASFA did not respond to multiple requests for comment over a number of weeks. The association does not publicly disclose the quantum or methodology behind fees paid by members, but it is understood they are at least partly determined by the size of the organisation by assets under management.
Analysis by Investment Magazine (Professional Planner‘s sister publication) estimates the removal of the two retail fund giants from ASFA’s membership will represent a decrease in revenues for the current financial year of at least $150,000. The figure, which was put to ASFA by email, is based on testimony from multiple sources and assessment of publicly available financial information.
That puts the association on track for an estimated loss of $800,000 for FY23, accounting for removal of the major funds from the membership, alongside government subsidies such as Jobsaver and payroll tax refunds. Indeed, if you set aside those two subsidies, Investment Magazine analysis suggests ASFA has made a financial loss in each of the last five years.
After removing the subsidies and refunds, ASFA made an adjusted net loss of $712,000 in FY22, a loss of $1.89 million in FY21, a loss of $426,000 in FY20 and a loss of $341,000 in FY18. In FY17 it made a profit of $20,000 even accounting for the government interventions.
The commercial dynamic may help to explain the exit of longstanding chief executive Martin Fahy and reported redundancy of deputy CEO and policy chief Glen McCrea. Financial Newswire last week reported that McCrea and three other ASFA employees were made redundant, referencing a note from ASFA chair Gary Dransfield to members claiming that the association’s “balance sheet, including cash reserves [were] strong”.
That communication came more than one week after Investment Magazine put a number of formal questions to ASFA and sought comment from a range of industry stakeholders.