Super funds should do away with intermediaries and focus on passive investing with active tax management, Parametric chief investment officer David Stein said in Sydney.
Stein said super funds were losing money through taxes on active management when securities were bought and sold. The problem had an easy solution, he said.
"Get rid of the middle men — the consultants and the traders and the brokerage firms and the active managers and all those guys you're paying large amounts of money to," said Stein.
He said too many industry jobs in Australia relied on being able to pick the best fund manager or consultant — but it was not about picking the best securities or best manager.
He said active management rarely justified its fees, while active tax management could make a massive difference to returns.
"We're talking about potentially significant amounts — you could save 10-15 per cent of your total final value and maybe even more than that," he said.
Super funds should be putting in place a passive portfolio that would generate returns for 30 years, while actively managing the tax components such as capital gains and losses, franking credits and international taxes.
"If I were an investor, I frankly wouldn't put a cent into some of these superannuation funds which have co-mingled my assets with someone else's, generate taxes, and then when I return, the tax benefit which I achieve gets lost through the fund," he said.
The industry was stuffing things up for investors and returns, Stein said, which stemmed from a lack of after-tax considerations.
Super funds should be able to manage large numbers of separate accounts for individual investors, with a customised tax experience and a customised investment mandate which changed over time, according to Stein.
