A dispute between two of the most ambitious new entrants to Australia's $2 trillion superannuation industry is on the radar of regulators and has enthralled the fintech community.
Spaceship, the Millennial-focused super product backed by Atlassian co-founder Mike Cannon-Brookes, is locked in an impasse with its back-end compliance and administration provider, Trustee Partners, which in turn is backed by high-profile Melbourne entrepreneur Phillip Kingston.
In the close-knit fintech community, it's an open secret that Spaceship, which declined to comment for this story, wants to get out of a critical licensing arrangement with Trustee Partners.
Since launching earlier this year, Spaceship has blazed a trail through the once sleepy superannuation industry. Pledging to give members a greater weighting to tech stocks and eventually, exposure to unlisted start-ups, it has amassed more than $100 million in funds under management.
It has advertised heavily on Facebook and Instagram and cleverly identified an underserved niche: young professionals working in the blossoming tech start-up scene.
But one of the reasons Spaceship was so rapidly able to achieve scale was by outsourcing a key regulatory requirement to an external provider. It obtained the licence needed to manage super for Australians from Trustee Partners.
It's relatively common for emerging super firms to do this. For example, Grow Super and Zuper, two other notable new market entrants, use Diversa, a division of ASX-listed OneVue, as their external trustee.
But an external trustee can wield significant power over sub-funds operating on its licence. It can influence the fees a provider sets, and even dictate how it advertises and promotes itself.
Spaceship has been heavily criticised by sections of the financial services industry for the fees it has charged its customers, although industry sources say it has privately blamed Trustee Partners for this situation.
After raising a big funding round earlier this year, Spaceship told its investors that it planned to cut its fees imminently.
Trustee Partners declined to comment on the dispute with Spaceship, citing company policy.
Meanwhile, intrigue surrounds the wider business dealings of Kingston.
Spaceship has blazed a trail through the once sleepy superannuation industry.
In the past, he was involved in Good Super, an ethical offering that incurred the wrath of ASIC in 2013 for a misleading website (Good Super's trustee was fined $20,000).
These days, Kingston is an investor in a phalanx of entities seeking to inject innovation in the Australian financial services landscape.
These include Trustee Partners and related entities, Tidswell Financial Services and Sargon Capital, as well as Unit, a business that was recently slated for an ASX IPO through Evans & Partners that has since been abandoned.
Legal action
Trustee Partners recently pulled out of a deal to acquire New Zealand's biggest pension administration business, Complectus, for $200 million at the 11th hour. Reports in the Kiwi trade press said it had something to do with office fixtures and fittings.
Now, the owner of Complectus, BSC, has confirmed to Fairfax Media that it is taking legal action against Sargon Capital, the owner of Trustee Partners.
Kingston declined to comment on the Complectus deal and distanced himself from Trustee Partners.
'Sort of symbolic'
"I'm not an executive or really involved in Trustee Partners day to day," he said. "I'm not on the board of directors. I'm not on the management team."
He has, however, given media interviews about the business, and at press time was still listed as managing director on Trustee Partners website.
"On the website I believe it says I am managing director, but that's sort of symbolic," he said. "I'm not in the executive team and I don't have day-to-day oversight of that business."
Kingston said his current focus was Trimantium Capital, a venture capital firm that describes itself as an "impact investor in businesses ready for high growth".
As yet, Trimantium not disclosed any notable investments besides, Kingston says, Sargon Capital.Â
Restructuring
As things stand, Kingston is the only director of Trimantium after the rest of the board – including Jennifer Smorgon of the eponymous Melbourne steel dynasty – quit.
"We are just restructuring our business, and moving to a different corporate structure, which means that directors will be used in different ways," Kingston said of the current board composition. "Getting people's time to sign paperwork when they are travelling can be challenging "
In April, Kingston also quietly stepped down from the board of LaunchVic, the Victorian government's $65 million program designed to entrench Melbourne as a start-up hub. He has cited frequent overseas travel for that decision, a claim corroborated by Victorian government sources.
Perhaps the most intriguing development involving Kingston's empire relates to the billionaire PayPal co-founder and Donald Trump supporter Peter Thiel. Entities controlled by Thiel reportedly committed last year to invest in Sargon Capital, only to back away.
Meanwhile, a different entity controlled by Thiel, Valar Ventures, later subscribed to $1 million in convertible notes issued by Spaceship.
Web of intrigue
It's a complicated web of intrigue, and my head hurts. The conclusion to draw from all of this?
It's easy to understand why the $2 trillion superannuation industry has would-be disrupters licking their lips.
It's an enormous market – the world's fourth biggest pool of savings – and one that is guaranteed to grow, thanks to Australian government policy. It's highly fragmented with no dominant player, and a lot of lazy incumbents.
But it is also heavily regulated, and for good reason.
So while super may appear to start-ups like it is there for the taking, pulling that off appears to be much easier said than done.
John McDuling is a senior writer for BusinessDay. Twitter: @jmcduling