It wasn’t a good day in the office for Rachel Sansom, director of regulatory governance of the AMP and NM Superannuation funds, and Richard Allert, chairman of the same funds, with the royal commission hearing of products delivering insignificant and even negative returns for members.

Counsel assisting Michael Hodge drew particular attention to a member in their late 60s who was wholly invested in cash and paying an adviser service fee every month. Their net investment earnings for the year ending 30 June 2016 were $3.23, and a net investment rate of return of 0.02 per cent.

This floored Mr Hodge.

“What I’m just struggling with is do you think that it’s possible that there is a rational basis upon which a member would knowingly remain invested in cash with AMP over the last three years?” he asked Ms Sansom.

She said it was possible as part of diversified portfolio, with the member not seeking returns.

“But it’s cash. You can invest in cash through another superannuation fund. This member is almost 70, this member could just invest in cash. I’m just trying to understand what view, if at all, the trustee has formed as to how this could possibly make sense?” Mr Hodge asked.

He noted that investors would be better off investing their retirement savings in an interest bearing account with AMP bank, and asked Mr Allert why they didn’t just do that.

“You would have to ask the client,” Mr Allert responded.

“Your point is why are they foolish enough to invest their superannuation with AMP?” Mr Hodge shot back.

“They left the cash there knowing the return they’re getting,” Mr Allert responded.

The underperformance led to the halving of fees, which delivered a slight benefit. Nevertheless, AMP is in the process of paying $5 million to 12,500 members.

'Ask the client' a popular response

Used by both Mr Allert and Ms Sansom, “you’d have to ask the client” was given in response to questioning around why members would stay with AMP, invest in cash, and even suggestions from Mr Hodge that AMP considered its customers “foolish”.

The trustee had limited oversight of advisers, with AMP Super depending on AMP Life and AMP Advice to monitor advisers.

A letter from the Australian Prudential Regulation Authority (APRA) tendered at the commission said, “AMP Super does not have visibility of the advisers who direct members to invest in their superannuation products or if the strategies for members are appropriate.”

Ms Sansom said AMP Super is in the process of improving this, but added that AMP Super looks at members in aggregate, while an adviser will look at the individual situation.

“AMP Super does not have visibility of the advisers who direct members to invest in their superannuation products or if the strategies for members are appropriate,” Ms Sansom said.

However, she acknowledged that the information flowing from AMP Advice and AMP Life may not be completely appropriate.

“Sometimes when advice looks at a particular issue, they will be looking at it through a purely advice lens, not necessarily a product lens. So it may be that should there have been an issue with a particular adviser, the impact of that issue may have been felt over a number of products, not purely superannuation products,” Ms Sansom said.

Nest Egg's rolling coverage of the royal commission continues here.