Maree O’Halloran was awarded the 2015 AIST trustee of the year award along with Bob Henricks of Energy Super. She stepped down from the HESTA board on June 30 after she left her role as director of the Welfare Right Centre, NSW, which is affiliated to Australian Council of Social Service (ACOSS) a nominating employer for the HESTA board. Just before her departure she spoke to Investment Magazine about the investment advisory panel at HESTA and the role of super for the low paid.
To represent a fund with a large swathe of members on low to middle incomes is to automatically take a more political slant on super. The move to end the annual contribution of $500 into the accounts of those earning less than $37,000 by 2017 has been openly contested by HESTA. Though too often, for Maree O’Halloran, the ACOSS representative on the HESTA board, the public and political debate has focused on how high-net-worth individuals use super.
As part of O’Halloran’s role as lawyer at the Welfare Rights Centre in Sydney, she was in direct contact with low paid and casual employees who are in need of social security payments, which gives her a clarity of thinking on the purpose of super for those who are never likely to relinquish their need for the age pension in their retirement.
Such first-hand experience puts her in the position of making one of the most succinct and apt descriptions of her members need for superannuation.
“If you retire at 67 and live for another 25 years, you will need to ensure that you can refurbish your house, buy a car or have a modest holiday,” she says. “If you are on the age pension it will provide a basic income, but it would not provide a lump sum. Super in that regard is important for those on low incomes to provide a dignified retirement.”
O’Halloran’s perspective on a dignified retirement for those on low-to-medium incomes, affects the fund’s general approach to incurring expenses.
So while historically trustee directors have taken up the opportunity to travel to see fund managers based overseas, the mood in the industry is turning against this and O’Halloran shares this view, describing them as “a gross waste of the members’ money”.
“As a board, under no circumstances would you be able to visit all the global fund managers that you are investing in,” she says. “That is not possible and nor should it be, that is why you have a consultant and an internal investment team. I do not think this is something the membership would think particularly necessary.”
Visiting only one or two of the funds 114 fund managers would lead to a misalignment of information and while she has not travelled overseas with the fund, she caveats her answer by stating a few members of the fund have done so for conferences.
O’Halloran is equally forthright on the issuing of bonuses, which HESTA does not offer senior staff. She reasons that a person gets a salary and is expected to do the job and there will be performance management processes in place if they are not doing it.
“I expect them to come to work committed to what they are doing and not because they are going to get a bonus for it,” she says. “For a similar reason I do not support pay at risk.”
She adds that bonus strategies often fail because it becomes difficult to be rigorous enough not to pay that bonus except if something disastrous happens.
At heart O’Halloran is also of the view that salaries paid in the financial services industry are unfairly disproportionate to what is paid to HESTA members in the health and community services industry.
“If you look at the work being done in both sectors, you would wonder why the differential exists,” she says.
Investment advisory panel
Two years ago HESTA set up an investment advisory panel in preference to an investment committee, as they did not wish to exclude the full board from some of the most important decision making processes a fund can make – the panel is more of a way of upping the level of the debate and communication.
This approach similarly reflects her own way of thinking about boards, based on her experience of seven years at the NSW SAS Trustee Board and five and half years at HESTA. So while a legal representative at legal firm New Law, which represents union members and possessing a masters degree in law including human rights, superannuation, banking and finance law subjects, she says it is a broad generalist knowledge that needs to be brought to bear.
“It is a mistake on a board to let people work in silos and think they are the expert on investment or something else,” she says.
She describes the panel as helping the board’s strategic decision rather than impacting on specific discussions around individual fund managers.
The panel serves to help formulate an investment case before it is brought to the board, to decide what issues for decision should be brought to the board and the medium to long term strategy of the fund. Made up of trustees, a representative of Frontier Advisors and the fund’s executive investment team, it also has the scope to bring in expert knowledge on a case by case basis – “the range of experts is incredibly broad” says O’Halloran. The panel meets quarterly to discuss topical issues, threats and opportunities. The minutes of meetings are shown to the board and the panel will itself report back to the board on its discussions. O’Halloran describes it as another way of getting input on investment decision making, other than from the consultants and the internal team. One advantage is to hear the difference in the way the fund’s consultant and the internal team describe or weigh up an investment proposition.