APRA deputy chair Helen Rowell said the regulator is ready to forcibly remove trustees of under-performing funds thanks to its long-awaited heatmap system that easily identifies who in the industry is falling short.

“APRA intends to turn up the heat on trustees that aren’t serving their members’ best interests – either by forcing them to lift the outcomes they deliver or forcing them out,” she said during a speech to the ASFA conference in Melbourne.

Speaking on the sidelines of the conference, Rowell said of APRA’s ability to get rid of trustees: “We have done it, we can do it, and we will do it.”

“There’s an evidence base that needs to be built and we needed to feel we were on strong enough ground but we are now in a better position to act firmly and strongly,” she added.

Rowell released some of the details of the regulator’s long-awaited assessment system which will show how more than 100 MySuper products are faring across investment performance, fees and costs, and sustainability.

The results of the heatmaps will be published next month and will help inform APRA’s supervision priorities. Trustees can expect the regulator’s supervision intensity to reflect the intensity of the colour shading, according to Rowell.

“The first thing you might notice is there is no green,” Rowell said explaining the heatmap to delegates.

“This is not a traditional traffic light system with three distinct and simple categories,” she said.  “The heat map is designed to emphasise underperformance, it’s not meant to give a pat on the back to better performing MySuper products, or be seen as a peer ranking mechanism.”

Rowell said the heatmap represented a significant step for the regulator and will show which products are performing poorly and where they need to improve.

The deputy chair said that unlike a sea of numbers on a spreadsheet, “a row of red across the heat map sends a message so clear and strong it nearly jumps off the screen”.

“That message is hard to ignore, and exactly what we’re counting on,” she said.

“As much as transparency is important, the ultimate purpose of the heat map is – to be blunt – to galvanise the trustees of underperforming products into action.”

The regulator expects trustees to work out why they have performed poorly in certain areas and whether the problems can be fixed in a reasonable period of time.

“If trustees don’t fix these issues within an acceptable time frame, we will be requiring them to consider other options, including a merger or exit for the industry in some cases,” Rowell said.

“Over the next year you can expect to see APRA increasingly prepare to judiciously apply all of its powers, including its new directions power and imposition of additional licence conditions, to achieve change where needed.”

The APRA official said trustees who appear on the heat map as white should not become complacent because it means the MySuper product is simply performing at benchmark for investment performance fees and costs.

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