Vision Super chair Geoff Lake speaks to Amanda White about his belief in in having a diverse board and making the case for younger directors.
Q: Vision has been a community super fund since 1947, that’s 71 years of providing superannuation. what can you take from that rich history?
A: Local government existed in Victoria before state government and Vision Super has been a key part of that. The tens of thousands of members in local government today, and the thousands over the years, have trusted Vision Super to look after their hard-earned savings.
We are strongly aligned and committed to the two key stakeholders we represent – local government and water authorities. We are fortunate, particularly on the local government side, [that] we have close relationships. There are only 79 councils in Victoria so we can have a personal and detailed engagement and relationship with employers.
Vision is a $10 billion fund with less than $3 billion in defined benefit and the rest in accumulation. The defined benefit fund closed in the early 1990s but it will be another 10-15 years before the youngest retire.
Q: What are the fund’s biggest challenges?
A: We have undergone tremendous change over the last four to five years. A lot of that has come about from the appointment of Stephen Rowe as chief executive in the middle of 2013. He has cut a lot of costs, introduced efficiency and made the fund a leaner, more effectively administered organisation.
One challenge we have, which is the same one that most in the profit-to members sector have, is that it is inevitable there will be mergers and I want to make sure Vision doesn’t miss out on opportunities there.
We’ve been growing our member base over the last few years, with most coming from outside our sector due to our marketing of a sustainable low-cost offering, Vision Personal. This now has 6700 members and close to $500 million and is the lowest-cost low-carbon product in the market.
This all came about from an innovative approach to marketing and gaining new members, because we can’t rely on [past means of] membership growth.
We used a lot of online advertising on Google and Facebook and [also advertised on] some bus shelters to attract members. We are very enthusiastically seeking organic growth and, while we are not actively seeking a merger path, we are [also] open to the benefits of a merger.
This is a very different board and senior management team, and is unrecognisable to some of the low points of the past, including the failed merger with Equip Super.
Q: You were appointed chair of the board in April 2018. what’s your vision for the fund (mind the pun)?
A: I’m interested in Vision being better than any other fund in how we engage with members. For example, with regard to socially responsible investment, it’s better to make that decision based on interaction with members, rather than just on a board discussion. Many funds have chosen to divest from tobacco. That’s not the kind of decision you can just make around a board table, you have to engage with members and get a clear weight of opinion. We are far more sustainably focused because of feedback from members.
Q: What are the most important things you have learnt from working with previous fund chairs?
A: There have been a few people chairing Vision since I’ve been a board member and they have all, in different ways, been good.
To be a good chair, you need a keen respect for all stakeholders. What they want is total confidence and trust in what we’re doing so they don’t have to worry too much. We will hold the AGM this year for members and for the first time it will be webcast and at a venue in the CBD of Melbourne.
It will be the first time we conduct this meeting with an AGM-type feel. The whole board and senior management will be there and members [will be able to] raise whatever ideas they want to talk about. It’s their money and their fund, we’re in the privileged position to make decisions based on their trust. Our role is enhanced by their involvement.
Q: How would you describe your leadership style?
A: I like meetings that add value and are not just rubber stamping. A super fund board is a board of generalists. I don’t like boards that say, ‘We have a lawyer, an accountant, a technology person.’ That’s rubbish. They can’t be the fountain of all knowledge to the board. Good boards need a good bullshit metre and need to figure out the best way to proceed with something and not be stuck in the detail of the particular endeavour.
I like diversity of age, gender, work experience, life experience, I like people asking questions and being part of collective decision-making. That’s the kind of board I like, one with enquiring minds and debate. It helps when people like and respect one another. At Vision, we respect the contribution and role that everyone brings, and we benefit as a result.
Q: At only 38 years of age, you must be one of the youngest chairs in the country. how is your age a benefit?
A: I was 22 when I was elected mayor and 28 when I was around the Council of Australian Governments (COAG) table, so I’ve always been one of the younger participants in whatever I’ve been doing. [People] my age and younger must be on superannuation boards. The average age for many boards has a six or a five in front of it but superannuation fund boards should be representative and that includes the demographic profile of members – it’s one aspect of diversity. Older people have a valuable contribution but you don’t need everyone on the board to be older.
Our board previously had only one member who was a woman, out of the eight total. Now we have four. Most of our members are women so it is totally unacceptable that a few years ago this was not [reflected] on our board. We set this is a priority.
[There is] still a way to go in gender diversity but cultural diversity is also a problem. If you look around at industry events, it is not representative of the streets we walk down. This needs improvement, especially for representative boards.
Q: What is the most important thing you are discussing at the board table this year?
A: The last few months have been dominated by talk around the royal commission. We have a continued focus on improving the business, reducing cost and improving performance.
One thing we are looking at is sustainability. We used to invest in a windfarm with a direct ownership but we recently sold that. We’re interested in a collective infrastructure vehicle focused on renewable energy and sustainability that fits in with our lost-cost and sustainability principles.
Q: Low cost is one term to describe the fund and one of your investment beliefs is that passive management should be used, where available, for the default investment positioning. what do you think is a reasonable management expense ratio for an investment portfolio of your size? how are you negotiating to get that?
A: The focus for the last four years has been improving our business and we have cut quite a bit of cost from our operations. We’ve saved $150 million in investment and administration expenses over five years. We now have operating costs of 25 basis points, compared with an average in the industry of 47 basis points, and investment costs of 73 basis points compared with an average of 87 basis points.
We are more passive than five years ago but are not a passive investment fund. We believe in active management but there has to be a clear basis for it in a sector where we can be confident of outperformance.
We have reduced the number of managers from 70 to 53, which still includes about 15 legacy private equity managers, so that has introduced some cost-efficiency.
Vision now has a very professional, well-built investment team. We didn’t have a CIO until Michael Wyrsch joined us from Frontier. Now, we believe we have the best CIO in the industry. I chaired the investment committee until becoming board chair a few months ago; Michael is very humble, conscientious and hardworking and has a strong set of personal values.
He is very diligently focused on getting good investment performance for appropriate levels of risk for our members. Performance is a good story, too. We have been first quartile for one and three years. We have a very disciplined and methodological approach, with our investment beliefs framing the discussion.
Q: You are a former mayor. what is your view of whether super should be arm’s length from government and the constant tinkering in the system?
A: I feel frustrated at the way superannuation appears to be on the agenda at every budget to tackle whatever perceived issue in that moment. There has also been a bit of an ideological overlay on that because of the idea of industry funds and unions. It’s been a shame. Superannuation needs stability and consistency. For people looking at retirement, there is a widespread fear or suspicion that the goalposts will be shifted. Everyone in government has a responsibility and potential to change that. Super is seen as something we should be proud of in Australia. We should respect the legacy by looking to build and develop further.
Q: You are a member of the board of the australian institute of superannuation trustees. what can aist and other industry groups do to better represent the views of the industry?
A: Industry Super Australia, AIST and the Association of Superannuation Funds of Australia don’t agree on everything but they do agree that super should be above the government fray and not be [managed] around short-term budget solutions. We should be setting objectives for super and having a process that defers more to experts on superannuation and retirement, rather than to politicians. [The] size of the superannuation industry [is] awesome, [and will be even greater] in the future; [the] contribution superannuation makes to jobs, projects and infrastructure needs to be highlighted.
