ASIC superannuation executive leader, Jane Eccleston warned superannuation trustees to step up efforts to understand, measure and deliver good outcomes for members.
The corporate watchdog official said at Investment Magazine’s Investment Operations Conference on Tuesday that there would be intense scrutiny by regulators over whether a fund’s focus on members was real.
“The challenge for superannuation trustees and super funds in the current policy and regulatory environment is how to embed the interests of the member at the heart of all its operations,” she said. “But it is not enough to say that this is being done – there must be accountability as well.”
Eccleston said part of the rationale for introducing the proposed Financial Accountability Regime was to ensure that there was sufficient accountability for end-to-end product management.
She told delegates the new design and distribution obligations – which come into force for financial product issuers in April 2021 – required issuers to design products that met genuine consumer needs and to use distribution channels that would get them to the right consumers.
“This requires not only an understanding of consumers, but a very clear picture of how the product will operate in practice,” she said. “It should mean that middle and back office functions need to have a strong voice in the product approval process.”
The corporate regulator now has product intervention power, she added, allowing it to intervene and take temporary action where financial products are likely to be detrimental to consumers. This includes being able to stop the product from being offered.
Penalties for breaches of obligations administered by ASIC and the regulator’s enforcement powers are currently being enhanced, she told delegates.
“The takeaway from all of this is that we are in a new normal,” she said. “Just because consumers choose or remain in particular financial products does not mean: you can assume that the product is meeting their needs or providing real benefits for them.
“The fact that they might have received disclosure of some kind about the product they hold does not change this.”
Eccleston also said APRA’s revision of the superannuation data it collected would be “very significant” for regulatory oversight and making more information available to the market. The official said ASIC had also been carrying out a pilot recurrent data collection for funds management.
She said initiatives like portfolio holdings disclosure required consistent collection and disclosure of data. The updated fees and costs disclosure regime, RG97, involves collecting information consistently across the industry to provide a point of comparison.
“In the day-to-day regulatory work that ASIC carries out, we often make data requests and a frequent response is ‘we don’t know, we haven’t measured that: or we haven’t captured that data’.” “This raises a question sometimes as to whether superannuation trustees and responsible entities are really committed to producing good member outcomes. If you want to understand if good outcomes are being delivered: then investment in measuring and assessing these outcomes is necessary.”