Free from the shackles of this inherently-flawed governance structure, not-for-profit trustees (and their fund’s executive) are able to select whom they believe to be the best fund managers, custodians, asset consultants and other service providers, while also driving a hard bargain on fees to the obvious benefit of members. That is not to say that that the trustee representative model can’t be improved. AIST’s submission to the Cooper Review recognises the need for greater board diversity, disclosure requirements of trustee and executive remuneration (in salary bands) and a regulatory framework to identity and then remove under-performing funds. We call for a greater focus on succession planning to improve both age and gender diversity across boards and we recommend that trustee directors be required to renominate after every three years. While educational standards among trustee directors are generally high (83 per cent of trustees have tertiary, graduate or post graduate qualifications), we believe that ongoing training and professional development is crucial.

We recommend mandatory training for all new trustees as part of their induction and, following this, that 30 hours of continual professional development be considered as best practice. While there is no escaping the fact that Australia’s superannuation industry has produced disappointing returns in the past two financial years, some negatives are better than others. It’s welldocumented that not-for-profit funds outperform retail funds, with recent research suggesting that the trustee representative governance model may be a key factor behind this out-performance, which in the past decade or so has amounted to a very significant 2.4 per cent per annum. Given this superior track record, AIST believes all default funds – where more than 80 per cent of Australians currently have their superannuation invested – should be managed under the low-cost not-for-profit governance model. In a system where contributing to a superannuation fund is compulsory and the level of member disengagement is high, it’s vital that default funds or options are well-designed and costeffective. As we look ahead to a far less forgiving investment environment, members of not-of-profit funds can be confident that representative trustee boards put member interests first. There is no reason, and no motive, for them to act otherwise.

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