The Inquiry looked at the issue of costs for the superannuation industry, observing a trend in the wealth management sector toward more vertical integration. As the report highlighted, this also means that the use of cross selling reduces competitive pressure that could otherwise have resulted in lower fees and costs to members.Several submissions highlighted the costs of regulation in reducing member returns, which "are inevitably passed on to the members". And while MySuper replaced default superannuation products for new accounts from 1 January 2014, superannuation funds have until 1 July 2017 to transfer existing members' balances into a MySuper account. The report discussed other mechanisms to drive fees down, such as that introduced in Chile in 2008, where — unlike Australia — superannuation contributions of all new members are placed in the same default fund. "Default fund management is auctioned on the basis of fees, creating stronger competition between funds for default fund status. Since these arrangements started, the fees charged by successful bidders in Chile have fallen by 65 per cent, although fees on other funds have not fallen to the same degree," the report observedThis was raised previously by the Grattan Institute.Jim Minifie, Grattan's productivity growth program director, who said he was pleased to see that the questions over the efficiency of the system were highlighted in the Inquiry's interim report."We also welcome the observation in the report that fees for superannuation administration have not fallen as the scale of the industry has increased as the size of the average fund has risen.  This is a very important finding as we believe the same fate could prevent expected efficiencies from the Super Stream reforms".That is, as cost reductions are achieved, whether due to scale or efficiencies of the type that super stream will deliver, funds end up competing away the excess returns as they chase additional members. "Our concern would be not so much over lack of competition but that this competition has trapped many funds into a cost increasing non-price form of product differentiation that ultimately just increases the drag on members' returns," Minifie said."We strongly support the option of auctioning the right to be the default fund provider," he said."Based on the work that we did this was the one type of system that could be bolted on to the existing superannuation system with the lowest amount of pain - it wouldn't be completely painless because there is a fair bit of work to be done," he warned.It would mean taking the existing list of over 100 mySuper products and just a few would be, eventually, candidates for mySuper default funds.Minifie also said that the fees for members' insurance were not examined in detail by the Inquiry but were an avenue worth pursuing.