Superannuation funds and their service providers should anticipate the services that clients will need to adapt to coming superannuation reforms.
Among many recommendations, the Super System Review, led by Jeremy Cooper, proposed changes to how superannuation funds are administered.
It therefore comes as no surprise that an industry body, the Affiliation of Superannuation Practitioners, formed to design a standardised model for a more efficient operating model to provide administration services for the super industry.
This is just one of the many elements of the changing landscape in financial services. Apart from managing the dynamic nuances of investment instruments and associated corporate-action activity, funds and the companies they appoint to manage investments or perform custody and administration services have to accommodate some significant developments. Examples of current challenges include:
• Adapting to the Cooper Review proposals that have been taken up by the Government, such as the new default fund guidelines of MySuper and SuperStream standards;
• Super funds beginning to invest money themselves; and
• Mergers of super funds (see fig. 1.)
As super funds, custodians and administrators try to adapt to these developments, either proactively or reactively, they change their operating models. An operating model is the framework that a business implements, manages and uses to monitor its investment and processing capabilities in servicing clients.
This framework encompasses:
• Data requirements The level of detail needed on the types of securities that funds invest in and the transactions they participate in.
The nature of such data can vary as tax and profit-and-loss outcomes change, and funds develop new ways of managing investments and risk.
The need to increase the timing and frequency of data downloads requires new, improved systems that are frequently more expensive.
• System architecture Must extend beyond storing and presenting data to underpin services such as portfolio management and risk management. They must feed data into order management systems used by investors, and perform registry capabilities to keep information about fund members up-to-date.
• Service provider capability To support data, product and technology services for funds.
• Management reporting To support appropriate risk and compliance standards used in monitoring the operations investment exposures of funds and measuring financial costs against benefits.
• Client servicing Managing data about fund members, processing cheques and supporting help desks at fund administrators.