Trustees should be spearheading changes to the superannuation industry’s standards, according to Ross Jones, deputy chairman of the Australian Prudential Regulation Authority (APRA), who advises trustees to engage and consult with the regulator.
“My recommendation is that trustees keep actively involved in this, that trustees don’t just outsource a lot of the decision-making processes,” he tells IM Online.
Jones, who spoke at the Fiduciary Investors Symposium Chair Forum in January, says industry funds are increasingly seeing the value in consultation as they prepare My Super licence applications in the lead-up to Stronger Super. “They’re getting feedback and we’re seeing from the applications that the feedback has been taken into consideration, and that’s making the process much better.”
Jones says that while some funds have withdrawn their applications, he believes they will be back fairly quickly.
“My guess is… and my greater concern is, that the ones who have not had much engagement with APRA prior to January 1, and who don’t come in until, say, March or April… may find it more difficult just in terms of the time, and the fact also that they’ve not had much feedback.”
It comes down to definition
Meanwhile, many in the industry are querying the approach to board independence, a dilemma Jones says comes down to definition, as industry participants have different understandings of the term.
“What we’re emphasising over and over is we now have standards of making powers, we’re focused on behavioural standards rather than dealing with structure,” he says. “And I think quite often in superannuation, when we’re talking about the term independent, people immediately think of a structure, rather than a mindset.”
Jones expects a byproduct of the new standards will be an increase in mergers and acquisitions, particularly given the financial and administrative burdens new rules will place on smaller funds.
“I think it’s inevitable that as the industry becomes larger, it becomes more sophisticated. I think you will see mergers between funds. There are all sorts of scale economies that can still be achieved through mergers,” he says. “By financial sector standards – in fact by the standards of just about any sector of Australia – superannuation still is quite unconcentrated. My guess is that you’ll get a lot of mergers in the next number of years.”