A massive money-making machine

This article is part six in a series. For the full series, go here.

Some readers may find aspects of this article distressing.

State public trustees take control of a person’s finances and care when tribunals rule they or those close to them are unfit to do so. But across the country they have been accused of opaque charges, charging fees for no service, and poor investments of client money. 

Crikey has sighted documents showing the public trustee charged one New South Wales woman $100,000 over 27 months in administration and legal fees; a Queensland man was charged $600 a week in management and other fees totalling $1 million; and a man with disabilities had $2000 taken out of his National Disability Insurance Scheme funds — overseen by the public guardian — for cleaning and outings that they say never took place. 

State offices of the public trustee have been accused not only of mismanaging funds but of having a profit-raising agenda, charging wealthier clients high fees to sustain themselves. 

When cash is invested under the public trustee, most of the profits are not passed on — in Queensland, the state has retained more than 60% of client funds’ earnings.  

A snapshot of assets and fees 

Fees the public trustee can charge vary by state and territory, ranging from annual management and administration fees to a percentage of a person’s pension, income or assets. 

But what these fees are for isn’t always clear. In one case, a Queensland woman fought for two years to find out what were the “special fees” of almost $2000 charged to her father. There were other fees, which Crikey has sighted: $390 for building and pest inspections; $349 to test smoke alarms; $273.90 for a locksmith.

Some of NSW’s annual fees include 0.77% on the value of assets held for trust management, 1.4% of assets for management fees (capping out at $15,000), $132 for account keeping, a $500 establishment fee, a $120 administration fee, and $220 an hour for property inspection. 

Tasmania’s public trustee charges a 6.6% commission on all income including interest, dividends, pensions and rental income (though this drops to 3.3% if the trustee isn’t managing the property). 

Queensland charges some of the highest fees in the country — $996.55 a year to manage each property and $4019 to manage assets valued between $500,001 to $750,000. In 2019-20, nearly half of all clients were paying $6403 a year on personal financial administration fees. Those on the disability support pension paid 37% of their pension.

Profit-driven public service

A review of Queensland’s public trustee fees found the office had a “strategic plan” to deliver a surplus for reinvestment into business objectives, to offset funding shortfalls and to subsidise the cost of services to clients with fewer assets. It also found the state had breached its fiduciary duty to clients. 

Former Queensland public advocate Mary Burgess tells Crikey: “The public trustee’s practice of retaining earnings on clients’ money is a breach of fiduciary duty and should stop immediately, or the government should legislate to allow these practices and require the public trustee to be transparent about how it uses client funds.”

The office has also been accused of double-charging, “fees for no service”, and charging for routine and potentially unnecessary advice “that invariably recommends investing client funds in accordance with the public trustee’s client investment manual”. 

Unlike other states, Queensland’s office of the public trustee is not funded by the state government. 

Burgess was not reappointed after her 2019-20 annual report was published. 

Victoria too was criticised by the ombudsman in 2019 for its fees, with an investigation finding evidence of poor financial management, including not ensuring pensioners were receiving their entitled funds (causing one man to miss out on $10,888 in extra disability support pension payments), not challenging debts, charging legal fees to dispute a will without asking the person under guardianship about their will, not giving clients a copy of their budget, and throwing away clients’ personal possessions, including taking family photos to the tip. 

“There is evidence that commercial pressures limit its services for clients as a whole,” the report found, with fewer than 2% of clients participating in a financial independence program to allow them to manage some of their money and show financial responsibility. 

While NSW’s trustee and guardian fees are largely set by regulation, it has a “mandate to operate our planning ahead, executor, trustee and power of attorney services on a largely commercial basis”, its 2019-20 annual report states. 

In Tasmania, the public trustee’s corporate plan focuses on attracting clients by developing products, and the ACT’s revenue was $687,000 higher than anticipated due to management fees, unclaimed money fees, trust administration fees and taxation fees.

Where’s the regulation? 

Across Australia, solicitors have their fees capped by legislation. To manage a deceased person’s estate with assets up to $150,000 in NSW, solicitors can charge only $1370 — 0.9% of their assets — as first-time fees. The public trustee, however, charges 4.4% of a person’s assets up to $100,000 as one-off executor fees, as well as costs to administer the estate. 

This is a massive concern for NSW litigation lawyer at Attwood Marshall Lawyers Lucy McPherson. 

“[The public trustee’s fees] are really astronomical,” she said, pointing to a recent case she had where it was proposed that the public trustee administer an estate worth between $4 million and $5 million, for which it would have been entitled to charge $100,000.

“[Attoword Marshall Lawyers] estimated somewhere between $20,000 and $30,000 to do exactly the same work.

“Apart from examples of mismanagement by these government instrumentalities, a lot of the problems that we see ultimately come down to exorbitant fees. It makes you wonder whether the objective of these organisations is revenue-raising for state governments, and not really about protecting vulnerable individuals. 

“There’s a lot of dissatisfaction within the community in relation to how these organisations operate.” 

A Queensland lawyer who asked to stay anonymous because she feared her career would be affected for speaking out, says estates were not always being administered by a legally qualified person — but were being charged as if they were. This is reflected in Burgess’ report. 

Little return on investments

The public trustee and guardian can also invest a person’s cash and take control of their superannuation. But the fruits of that investment doesn’t always trickle down to the client: Between 2019-20, Queensland’s public trustee earned $20.9 million in interest revenue but paid out just $8 million. It paid a flat rate of 0.4% and pocketed the change. 

Burgess says this is a “breach of fiduciary duty”.

Queensland has used the same financial advice service producer since 2013 — Morgans, which has been slammed by the Australian Securities and Investments Commission (ASIC)  for providing poor financial advice. Other state trustees use internal staff to advise on investments. 

In 2013, one equity fund that a client’s money was invested in produced negative returns for five years. 

The Queensland public trustee also has a preferred superannuation fund, Australian Super. One woman Crikey spoke to said her husband lost $14,000 after his super was transferred to Australian Super against his wishes. 

Australian Super supports lapsing binding nominations — meaning three years after a person nominates how they want their super spent when they die, it can use its discretion in paying out a death benefit. 

State trustees contacted by Crikey defended their pricing models. Victoria said its model was reformed in 2018 with scaled pricing, saying the state trustee is the only professional service available for those with limited means.

NSW said its fees are publically disclosed and set by regulation. It said its financial managers come from a variety of educational backgrounds, with specialists available when needed.

The Queensland Public Trustee (PTQ) said it took concerns about breaching fiduciary duty very seriously and “is, and always has been, fully compliant with its duties owed to its customers as a trustee and fiduciary”. It said it has implemented a financial independence pathway program to help customers regain financial independence, and has commissioned an external review of its fees and charges. The PTQ spokesperson added the organisation has maintained interest rates payable to customers to ensure they are receiving competitive market returns on their funds, and that an interest differential remains available to the public trustee.

To read more pieces in this series, go here.

For legal reasons, please don’t identify yourself or others under guardianship or financial administration in the comments.