The superannuation sector was read the riot act in Melbourne this morning, when the chair of the Australian Securities and Investments Commission (ASIC), accused the sector of forgetting its purpose.

Speaking at the Financial Services Council, ASIC chair James Shipton said he hoped the royal commission would make clear to the Australian public what ASIC has been attempting to address.

The fifth round of public hearings will begin on 6 August, and will focus on the superannuation sector.

With this in mind, Mr Shipton said Australians in this sector need to remember their roles as custodians of Australians’ retirement savings.

Further, thanks to compulsory superannuation, funds need to remember they are holding money that consumers have had no choice but to hand over.

“As a result, your responsibilities to your investors specifically, and the community more generally, are amplified – and rightly so,” he said.

“To be blunt, there has been too much focus in many parts of the superannuation sector on exploiting opportunities to make money from Australians instead of focusing on the responsibilities that come from being the custodians of other people’s money. This must change.”

Funds exploiting disengagement, making processes unreasonably difficult

Mr Shipton said funds have exploited consumer disengagement and poor financial literacy by making it excessively difficult to opt out of finance.

Further, he said the sector had dispersed poor advice around superannuation options like setting up an SMSF or changing super product.

Savers have had to reckon with difficult processes in insurance claims and complaints handling, and it’s even harder for vulnerable communities.

“For example, Indigenous Australians in remote areas whom are eligible to access superannuation benefits, but are unable, or whom have significant difficulty, in doing so,” Mr Shipton said.

His final criticism was funds’ “defensiveness when it comes to transparency about fund operations – for example, a resistance to disclosing investment holdings”.

“This is indefensible when, as I said before, it is other people’s money,” Mr Shipton said.

The chair called for the entire industry to remember its purpose – “That the industry exists for both an economic and societal purpose – to provide a retirement platform for Australians.”

The way forward is for the industry to recognise, manage and remove conflicts of interest where needed.

However, he acknowledged that these conflicts aren’t new and addressing them can meet resistance, especially where it’s tied up with pay.

“This must change because conflicts of interest that are embedded in remuneration become embedded in corporate culture. With the result being that the culture is not one that will have the best interests of its customer in mind,” Mr Shipton said.

“Moreover, as we all know, shifting these cultural norms is firstly a question of leadership. Accordingly, addressing conflicts of interests requires attention from the most senior leaders in finance.”