12.2 Evidence

12.2.1 IOOF Investment Management

IOOF Investment Management Limited (IIML) is RSE licensee of the IOOF Portfolio Service superannuation fund (the Portfolio Service). Through the ‘platform’ provided by IIML, superannuation members can invest in particular managed investment schemes run by IIML or by third parties.[1] IOOF Holdings Ltd, IIML’s parent company, has ‘platform services agreements’ with some of these third party REs. Under those agreements, IOOF Holdings promises that its related entities (IIML, Questor, or Australian Executor Trustees) will provide ‘administration and investment related services’ to the RE.[2] In return, the RE makes payments to IOOF Holdings.[3]

The payments are calculated in two different ways, depending on when the contract was made. For contracts made before 1 July 2013, the payments are calculated according to the percentage of funds under management.[4] For contracts made after that time, the payment is $10 per member.[5] The services to be provided under each type of contract are the same. Mr Oliver agreed that the fixed fee was introduced because FoFA banned most volume-based shelf space fees.[6] He understood that the $10 fee was a recovery of IOOF’s process costs.[7]

The Commission asked IOOF to identify the amount of fees it received that was generated from investments of superannuation members’ money. In the quarter ending March 2018, REs had paid total fees of $2.317 million based on Portfolio Service members’ investments.[8] The amounts paid by individual external entities ranged from $419 to $186,034.[9]

The Commission asked IOOF whether it considered that the superannuation fund should receive the benefit of these payments. Mr Oliver answered a slightly different question. In his written statement, he gave evidence that IIML, the trustee of the fund, believed it should only receive these payments if it provides services to the REs of the managed investment schemes.[10] In his oral evidence, Mr Oliver said that this was what IOOF’s legal counsel had told him.[11] He did not know ‘directly’ if the IIML Board had ever considered the issue.[12]

It was not clear what actually happened to these payments. Mr Oliver gave evidence that IOOF Holdings passed on the payments to IIML as the ‘platform operator’.[13] His only basis for this evidence was that his ‘governance service colleagues’ had told him.[14] Yet this was not consistent with IIML’s financial reports, which in the 2017 financial year showed payments from related entities of only $154,498.[15] Mr Oliver said he was not familiar with those reports, and could not explain the difference.[16]

12.2.2 OPC and Oasis

OnePath Custodians Pty Ltd (OPC) and Oasis also provide platforms that allow superannuation members to invest in managed investment schemes operated by third parties. In some cases, the REs of those managed investment schemes make payments back to OPC, Oasis, OnePath Life or OnePath Funds Management (OPFM).[17]

Those payments are made under contracts that fit either a ‘pre-FoFA or ‘post-FoFA’ test.[18] Under a ‘pre-FoFA’ contract, the payment is calculated as a percentage of funds under management.[19] That is, the RE pays ANZ a rebate for each dollar invested in the managed investment scheme. The payment is described as a ‘shelf space fee’.[20] No ANZ company has to provide any service in return for the fee.[21]

The Commission also asked ANZ to identify the amount of fees it received that was generated from investments of superannuation members’ money. For the year ending 30 September 2017, REs had paid OPC and Oasis more than $13.7 million based on superannuation fund members’ investments.[22] The amounts paid by individual entities ranged from $489 to $2,228,031.

Under ‘pre-FoFA’ contracts, none of the payments are given back to members.[23] The money is kept by ANZ. Mr Pankhurst’s evidence was that the rebate payments are one of the things ANZ considers when setting the fees it charges to superannuation members.[24] That is, investment management fees were one of the costs that formed part of the pricing model, and the rebates from REs reduced that cost.[25] Mr Pankhurst did not suggest there was a direct correlation between the rebates received and the price charged. However, he also said that this type of arrangement was ‘antiquated’. Now, in many cases ANZ simply fixes a price and ‘there are no payments’.[26] In the case of the new Oasis Wrap platform, the rebates are returned to members.[27]

Mr Pankhurst gave evidence that OPC and Oasis had not formally considered whether the relevant fund should receive the benefits of these payments.[28] However, at its meeting in July 2018, the combined OPC and Oasis Board received a presentation about these payments.[29] The board asked for further information, and commented that it will ‘need to clarify how it views these arrangements [under] the current and future structure’.[30]


[1] Transcript, Mark Oliver, 10 August 2018, 4572.

[2] Exhibit 5.100, Fund Manager Deed IOOF Holdings and Aberdeen Asset Management Limited, 29 April 2010.

[3] Exhibit 5.100, Fund Manager Deed IOOF Holdings and Aberdeen Asset Management Limited, 29 April 2010, 5.

[4] Transcript, Mark Oliver, 10 August 2018, 4573.

[5] Transcript, Mark Oliver, 10 August 2018, 4573.

[6] Transcript, Mark Oliver, 10 August 2018, 4573.

[7] Transcript, Mark Oliver, 10 August 2018, 4574.

[8] Exhibit 5.99, Witness statement of Mark Oliver, 26 July 2018, Annexure D.

[9] Exhibit 5.99, Witness statement of Mark Oliver, 26 July 2018, Annexure D. Note that IIML was recorded as having paid $667,290 during the period.

[10] Exhibit 5.99, Witness statement of Mark Oliver, 26 July 2018, 17 [40].

[11] Transcript, Mark Oliver, 10 August 2018, 4579.

[12] Transcript, Mark Oliver, 10 August 2018, 4578.

[13] Transcript, Mark Oliver, 10 August 2018, 4579, 4582; Exhibit 5.99, Witness statement of Mark Oliver, 26 July 2018, 17 [44].

[14] Transcript, Mark Oliver, 10 August 2018, 4582.

[15] Exhibit 5.102, IIML Financial Report, 30 June 2017, 28.

[16] Transcript, Mark Oliver, 10 August 2018, 4580–2.

[17] At least in the case of OPFM, it was not clear which company received the payments: Transcript, Mark Pankhurst, 15 August 2018, 5039–40; Exhibit 2.95, Witness statement of Mark Pankhurst, 13 April 2018, Exhibit MJP-18 [ANZ.800.467.0007].

[18] Transcript, Mark Pankhurst, 15 August 2018, 5042.

[19] Transcript, Mark Pankhurst, 15 August 2018, 5043.

[20] Exhibit 2.95, Witness statement of Mark Pankhurst, 13 April 2018, Exhibit MJP-18 [ANZ.800.467.0007 at .0025].

[21] Exhibit 2.95, Witness statement of Mark Pankhurst, 13 April 2018, Exhibit MJP-18 [ANZ.800.467.0007].

[22] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, [158]. This amount excluded fixed payments and fee rebates that were passed back to the member.

[23] Transcript, Mark Pankhurst, 15 August 2018, 5045.

[24] Transcript, Mark Pankhurst, 15 August 2018, 5044.

[25] Transcript, Mark Pankhurst, 15 August 2018, 5044.

[26] Transcript, Mark Pankhurst, 15 August 2018, 5044.

[27] Transcript, Mark Pankhurst, 15 August 2018, 5045.

[28] Exhibit 5.256, Witness statement of Mark Pankhurst, 1 August 2018, 73 [157].

[29] Exhibit 5.254, Draft Minutes OnePath Custodians Meeting 26 July 2018, 13 August 2018.

[30] Exhibit 5.254, Draft Minutes OnePath Custodians Meeting 26 July 2018, 13 August 2018.