The former deputy chairman of the Australian Securities and Investments Commission, Jeremy Cooper, doesn't have a reputation for being mischievous. But he must have known his proposal for low-cost, simple universal super funds for most fund members would get the vested interests squawking.
Cooper made the recommendation in his preliminary report of his review into super. This review was commissioned by the Federal Government in May with a wide-ranging brief to examine the governance, efficiency, structure and operation of Australia's super system.
That's a big ask but Cooper and his fellow panel members haven't fallen into the easy trap of arguing that if it ain't broke, don't mess with it. The signs indicate the panel is taking a broad view indeed of our super system and finding room for improvement.
The recommendation for simpler funds for the majority of members stems from the fact that most members are disengaged with the day-to-day management of their super.
It may be that they have more pressing demands, that the whole thing is gobbledygook to them, or that they trust the money will be there when they need it.
But the bottom line is the same. Having shown no interest in choosing the right super fund for them, their money goes into their employer's default fund.
This isn't always a bad thing. In many cases, the default fund is a large fund with a ''balanced'' or ''balanced growth'' default investment strategy that attempts to maximise your savings over the longer term.
These funds have historically returned about 3.5 per cent above inflation, which won't sound all that flash to the thrillseekers out there, but beats hands down more conservative investments such as cash.
The global financial crisis highlighted some problems with such a one-size-fits-all approach to investing. Those about to retire or who had just retired were hit particularly hard by the market falls. And it came as a rude shock to those members who had thought their super had nothing to do with the sharemarket.
But that's not the real problem, as Cooper sees it. Thanks to the array of default funds and differing members and expectations, the report says some fund members are given a false illusion of how much protection they're getting, while others are paying for unnecessary complexity.
As anyone with a passing interest in super would know, it's not so much an industry as a nation of warring tribes. Not-for-profit funds, led by the industry super funds, sell themselves on a value proposition and are scathing about the commission-paid advisers who sell the products of their retail fund competitors.
The retail funds tend to be geared for those advisers - offering a full suite (sometimes hundreds) of investment options within the fund - though at a (usually) higher cost.
The review wants to cut through all that. Instead of arguing about whose product model is best, it wants to set rules for the funds that can be offered to different types of investors - especially those who don't choose for themselves.
Most fund members - Cooper calls them ''universal members'' - who don't want to choose their own fund would have to be placed in lower cost default funds with a single investment strategy (though it could be life-cycle based, with exposure to riskier investments reducing as you age).
The fund would have a trustee with a fiduciary duty to act in the best interests of members. It could offer insurance, but would have few other bells and whistles. And most importantly, it wouldn't need hefty ''advice'' costs because no choices are actually made by the fund member.
Fund members who didn't want this simple model would still be free to choose a more sophisticated fund but the level of protection wouldn't be as high.
And - here's why the vested interests are going to be falling over themselves to knock this proposal down - all the costs of marketing these funds to investors, having all those investment options, and producing the disclosure documents needed would actually be paid for by the people who want all the bells and whistles - rather than being spread across a wider fund membership.
The Cooper review also proposes a more conservative, low-cost fund for those fund members who have temporarily lost touch with their account.
The idea is only a recommendation. The Government may not act on it.
But if it does decide to entertain the idea, expect the fur to fly.
You don't need to be a financial genius to see that the classification system is going to be the first sticking point. While there will be a market for choice funds, the main game will be the provision of universal funds.
And while Cooper specifically stated that the aim was not to limit universal funds to not-for-profit providers, the structure of their funds is clearly closer to what the review is intending than the structures of many of the retail funds.
Rather than rejecting the proposal outright, the opening salvo of the for-profit fund industry has been to use the recommendation of the review panel to step up its campaign to have default funds removed from industrial agreements.
It argues that they are uncompetitive and benefit industry funds. And the industry hopes the Cooper proposal will break this link - though the review panel itself has merely raised this as an issue worthy of further investigation.
But full marks to Cooper & Co. Whether or not the recommendation ever sees light of day, the report has tackled head-on the industry's reluctance to seriously address the issue of making super cheaper for the average member.
For too long, high costs have been couched in terms of offering value because they pay for unused extras such as lots of investment options and advice.
In a market where fund promoters have grown fat from the flow of compulsory super, investors need a better, cheaper, and simpler starting point. Then, if they want extras, they have the choice of paying for them.
