Ethical super funds accused of misleading members

By Cameron Micallef

February 04 2021
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Two ethical superannuation funds have come under scrutiny for sharing similar investment options, despite having different outcome objectives for members.

Ethical super funds accused of misleading members

The House of Representatives standing committee on economics has accused Future Super and Verve of misleading consumers, after it was revealed the bulk of their members’ money is in similar products.

Additionally, the argument was put forward that consumers aren’t privy to the funds’ relationship with Diversa Trustees – a shared trustee that has been accused of creating a “giant SMSF” style investment for members.

“It seems to me consumers are being misled,” Liberal MP and committee chair Tim Wilson said during questioning.

Mr Wilson asked why at least 60 per cent of their funds under management are allocated to three BetaShares ETFs, with the environmental impact of these investments also called into question.

“Despite the headline of what you’re seeking to achieve, most of your investment is outsourced effectively by buying products from BetaShares, into passive low-cost products,” Mr Wilson questioned.

‘Future Super actively working with ETF providers’

In response, Future Super governance and regulatory lead Fahmi Hosain defended the fund’s position, arguing that the fund had “actively worked” with ETF providers, with 12 staff members tasked with screening each individual company Future Super is exposed to.

“The investment into ETFs is part of our strategy. We’ve done this consciously to reduce our costs, but we have also innovated in this area,” Mr Hosain said.

“We are essentially active managers of these ETFs because we constantly look at the underlying assets and they have to meet our screens. So, it’s not a passive investment.”

The questioning then extended to Diversa’s business model, with MP Dr Andrew Leigh probing Future Super’s and Verve’s involvement in Diversa’s marketing.

“It does smell to me that you’ve set up a model which is reminiscent of some of the more problematic practices that we saw during the banking royal commission in which you have high cost promoters out there that are selling a pretty similar product,” Dr Leigh said.

The Labor MP also questioned whether the funds are simply targeting different subsections of the market, while providing similar services.

“Yet, when I look at the website, Future Super tells me your super has the power to combat climate change; Verve Super tells me it’s Australia’s first ethical super fund for women by women, yet I see very little difference in the actual investment strategies of these funds,” Dr Leigh said.

‘Achieving members’ outcomes in different ways’

However, Verve Super CEO Christina Hobbs said both funds are achieving members’ outcomes in different ways.

“From Verve’s perspective, we have three key points of differentiation. The services we provide and financial coaching is a part of this,” she said.

Ms Hobbs said that while it is important to consider the similarities in investments, the alternatives are just as important as they are providing impacts for members.

“From an investment perspective, this is certainly where the bulk of effort and costs goes. This includes from Future Super perspective significant investment in renewable energy,” she said.

“Verve Super also has this form of impact investing but also other forms of impact investing. For example, the vision bond.

“The vision bond is an investment in a world vision product that was deemed to be a good investment. This is an investment using our members superannuation balances to invest in the micro refinement projects of women, rural farmers in developing countries, providing a hopeful stable return to our members while also providing a benefit to the communities.

“So, there are differentiation in how we invest and the services we are providing,” Ms Hobbs concluded.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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