In this Q&A with Investment Magazine, VicSuper chair Christine Stewart talks about trust, governance transparency and the importance of robust discussion with members.
Q | You have been on the board of VicSuper since 2009 and chair since 2017. How does having a long experience with the fund help you around the board table?
A | VicSuper has grown and evolved in so many ways since 2009. While the fundamentals have not changed, like our strong member focus and commitment to our advice model, we look very different to what we were 10 years ago. We’ve seen our advice offer expand substantially, growing our presence in Victoria and also providing enhanced digital services for members. But one of the biggest changes has been the growth and development of our investment team and underlying investment strategy.
I’ve seen a lot of change in the industry, from a regulatory but also from a member behaviour perspective. We’re certainly seeing the combination of our ageing population, the substantial media coverage that super has had over the past year, and technology providing connectivity like never before.
This means that super is increasingly at the forefront of many of our members’ minds – and that awareness and engagement brings different considerations and opportunities. Having a long tenure has allowed me to bring a degree of continuity and consistency to the fund and our members throughout this period of substantial change.
We’re very fortunate that VicSuper has a board with strong experience across a range of disciplines. Our directors continually challenge and ask questions to manage the fund in the best interest of our members.
Q |Super funds have been in the spotlight with the release of the Productivity Commission and Hayne Commission’s final report. How do you think about fund governance now given the findings?
A | Super has been in the spotlight like never before but interestingly as a result, the value that the profit to member model brings is becoming increasingly apparent.We believe strong governance and transparency in the industry is crucial. Our members, and all Australians have a right to trust their financial institutions.
VicSuper has always advocated for robust discussions that give Australians the right to trust the financial institutions which manage their savings. As a profit to member organisation our members are our core focus and we support positive steps that can help increase the transparency, trust and governance of business processes that affect them.
Fund governance has to be the cornerstone that helps rebuild the trust in the financial services industry, including super.
As a fund this has always been of utmost importance for us and will continue to be one of our highest priories. We are already assessing the recommendations raised by the two commissions.
Q | You are on the VicSuper remuneration committee. What is your perspective on the remuneration in the industry fund sector? Is it enough to be competitive?
A | Most funds in the industry continue to expand and improve their service offering with larger funds moving to internalise funds management. To attract and retain the right skills, funds have had to increasingly offer a comprehensive range of benefits and remuneration with incentives.
We’ve taken the view that we need to attract and retain the best people possible to deliver the best value for our members.Our remuneration framework has been designed to achieve this by providing contemporary market remuneration and incentives that are aligned to members’ best interests.
Q | The value of life insurance in super has been questioned. Do you think this is justified?
A | The Australian working population has historically been heavily underinsured. However a key factor in this underinsurance is awareness of the purpose and value of insurance cover. Underinsurance can potentially cost the government over a billion dollars in social security payments each year.
Group insurance provides an affordable way to purchase cover and automatic cover has helped Australian workers reduce the underinsurance gap helping families meet their financial commitments. It also demonstrates the importance of life insurance to Australians enmasse.
Q | VicSuper is committed to providing its members with transparency. What are some practical ways the fund does this and have there been changes during your tenure?
A | Yes, we’re fully committed to transparency. This commitment hasn’t changed during my tenure but the way we meet it has.
We’re one of a small number of funds which publish our complete equity investment holdings on our website. We also publicly disclose our complete voting record (at investee company AGMs) on our proxy voting web page. Over the years, we’ve expanded our company reporting, while still trying to make it concise and useful for members.
Our annual report is underpinned by the International Integrated Reporting Framework and clearly demonstrates how the fund is adding value to our stakeholders. Our report shows the financial value of our contribution to the UN Sustainable Development Goals through investing our members’ savings. We also provide a Climate Change Report, a Stewardship statement and PRI Report, in addition to our financial statements.
Q | The Modern Slavery Bill 2018 passed in Australian parliament on November 29. How are you identifying and responding to potential risks in your operations and supply chain?
A | We have a dedicated corporate responsibility team who work closely with our risk team to identify if any modern slavery risks exist in our operational supply chain.
However, given the nature of VicSuper’s operations, we would consider the risk of modern slavery to below. If we did find any areas of concern we would act immediately and also include these in our disclosure.
Q | VicSuper is committed to taking an ESG focus and adhering to the responsible investment principles. How has this changed the way you work with your investment managers?
A | We undertake a responsible investment approach for all asset classes with the exception of cash. Our approach to responsible investment is based on four pillars – environment, social and governance (ESG) integration, active ownership, member choice and investing in sustainable outcomes.
Our ESG approach has consistently been a strong focus for the fund and we have strengthened that even further in recent years. We believe integrating ESG factors into our investment processes helps protect the long-term value of our members’ retirement savings.
Because we use external investment managers to invest our members’ retirement savings on our behalf, it’s important to us that our investment managers share our beliefs – something our directors are absolutely committed to. Through our supplier due diligence process, we select managers which are able to demonstrate a strong approach to ESG integration, and then monitor their progress through regular reporting and review meetings. We now have an experienced in-house resource dedicated to this.
Q |The post- retirement phase of a members life is increasingly taking centre stage. In 2015, your fund launched the first combined pension/annuity product. What have you learned from being an early mover?
A | It’s been disappointing that as an industry we haven’t made much progress in the five years since the Murray Review recommendation. But at VicSuper we have benefited from being an early mover in a number of ways. It has certainly helped us evolve the philosophy and process we follow to help members achieve income security in retirement.
It’s also provided us with an opportunity to talk to members and gain a much better understanding of their preferences in terms of the trade-offs between income in retirement, longevity risk protection, attitude to inflation risk and drawdown flexibility.
It’s also reinforced that ‘one size doesn’t fit all’ and the importance of advice in the decision making process. Our combined pension /annuity product is the first step in an important journey for us and we know that we still have work to do.
Q |How would you describe your leadership style?
A | I’ve always adopted a collaborative approach with focused discussion on the issues, making room to ensure that everyone has a voice at the table. After years working through issues with many stakeholders I do believe that consensus drives better outcomes than a majority vote.
Whilst this may not always be possible it’s important for everyone to have the opportunity to be heard and to challenge and ask questions to help make informed decisions.
Q | At VicSuper, what is the most important conversation you’ll have around the board table this year?
A | The Protecting Your Super legislation will no doubt drive significant change in fund membership in the future and given the governance and scale recommendations from the royal commission and Productivity Commission, I believe we’ll see more inorganic growth activity in the near future.
Whilst VicSuper is not likely to see a significant decline in member numbers as a result of inactive members being transferred to the ATO, inorganic growth remains a key option on the table for us to help deliver scale benefits for our members. We constantly keep an eye on our growth relative to other super funds.
Being a leading fund is not just about having more funds under management, but it’s important to achieve scale as it can potentially allow us to do more for our members, at a lower cost.
It’s important for us to always be open to looking at merger or acquisition opportunities that can help deliver the best possible outcomes for our members. While we’re discussing these issues the most repeated conversation around the table will be ‘is this in our members’ best interests?’
Q | You’re a former teacher and long-serving deputy secretary of the Australian Education Union. How does that experience impact your role at VicSuper.
A | I’ve had lifelong experience in dealing with people, whether it be leading a school class discussion, listening to employees, or dealing with employers and union representatives on complex, often controversial issues.
The common theme throughout is the importance of listening, understanding their position, negotiating and arriving at a mutually acceptable solution that works for both parties. Often it may also be an
education exercise where the other party may not be aware of the potential solution that may be in their best interests.
Dealing with a wide variety of people has taught me never to let uninformed assumptions drive my decision making and to be curious, ask questions and have all the facts on the table before considering any trade-offs and making decisions. It’s also meant that I’m continually learning – something I’m never complacent about.