Howard Rosario, chief executive of Westscheme, has posed a series of questions for his fellow fund executives about the future of their roles and the prospects for their funds. Published by the Fund Executives Association Ltd (FEAL) in its latest newsletter, comments have been invited for further discussion.
Rosario originally raised some of the major issues facing super funds at last year’s Association of Superannuation Funds of Australia conference, prompting FEAL to detail the issues and invite commentary from the industry. He says that he started to think about these issues following his fund’s trustee licensing process commenced last year. He lists six topics: • Culture – do funds have distinctive cultures? Whose obligation is it to maintain a fund’s culture? And how is it maintained when staff change (especially when, in the future, staff may have a different view of work/life balance). • Strategy – the current 27 million super accounts should trend down to approximate the number of workers – about 10 million. What does this mean for a fund’s growth strategy? Does the Sole Purpose Test restrict flexibility to this challenge? Does fiduciary responsibility require trustees and executives have an exit strategy for their fund? Are you a better trustee or executive because you serve more members? With Choice, is the trustee structure still appropriate? • Economies of scale – is this about doing the same for more clients or attracting more clients because the fund offers more variety? Is the latter more important than the drive to survive? Whose interests are a fund’s survival most relevant to? • Investments – do members who chase performance need to have it explained to them that this implies short-termism? Workers who provide labour rely on capital to provide a better lifestyle in retirement. Don’t members need to understand how directly related fund returns are to the success of businesses? Is there room for altruism in the Sole Purpose Test? • Institutional issues – funds are institutions and they will get bigger and bigger. The new people appointed to run them are likely to have very different values and skills than the people they replace. How will trustees deal with the fund executives of the future who are likely to be highly technically proficient and managerially skilled? What is to be done to make sure the skills and knowledge of trustees keep pace with the new executives? How is the correct allocation of managing and governing between trustees and executives to be achieved? To what extent should trustees and executives look to service providers for financial support, sponsorship, subsidy or hospitality? Should former fund executives be banned from becoming trustees to avoid micro-management? • Regulation – all responsible officers – trustees and executives – have a joint and several duty to be fit and proper. What if they disagree? Is the regulatory regime reducing trustees and executives to being formulators and completers of check lists? Is there room for initiative and differentiation? Are the risks worth taking? Responses to Deborah Gray, communications executive, FEAL, on: Deborah.gray@feal.asn.au
The Coalition is reportedly considering a proposal to reduce the superannuation guarantee to 9 per cent if it wins the election. Many in the industry would understandably view any such move as a partisan effort to weaken the system, but they must also be open-minded about the evidence and accept that improving quality of service is the best response to critics.
Colin Tate AMJanuary 15, 2025
