ASIC Commissioner Simone Constant says super fund trustee boards, and not just management, must be held accountable for helping members transition to retirement.
Constant on Wednesday told the Retirement Conference, a joint initiative of Investment Magazine publisher Conexus Financial and The Conexus Institute*, at Old Parliament House in Canberra that boards must be a bigger part of the solution to the retirement challenge.
“ASIC is not going to tell you who to have on your board, but whoever you do have must deliver to the standards that members expect in a way that is measurable and meaningful,” said Constant, who joined the regulator from Commonwealth Bank last year and has carriage of both super and financial markets.
Constant acknowledged the positive progress made by funds that have set up retirement-focused leadership roles and teams, but said the effort needs to stretch beyond that.
“It’s a good start, but it needs to extend beyond the executive level,” Constant said.
“Boards of trustees need the right skills and the right reporting structures to oversee and deliver retirement income strategies as well as the consistent and fair delivery of member services more broadly.”
Constant said all funds need to rise and deliver the best possible retirement outcomes along with consistent customer-centric services.
“Put simply, we need funds to show us – and not tell us – and more importantly to show your members you’re doing better for them,” Constant said.
Embrace competitive tension
Constant also urged the audience, which included senior representatives of the superannuation sector to view their members as “customers” and embrace a competitive tension that doesn’t take their business for granted. The commissioner reminded funds of their many legal obligations but said their ultimate obligation was customer service.
“Your most important obligation is to your customers – note the deliberate choice of language there: customers, not members,” Constant said.
“At ASIC, of course, we’re well apprised of the legal connotation and associations of the word member but that is not how they see themselves. They see themselves as customers.”
Constant said this is how individuals engage with their financial service providers, and it is the level of service they expect.
“We expect you to be customer-centric in the way you approach their needs,” Constant said.
“Delivering strong returns and balances is just part of your job. Just as important is meeting your members’ – your customers’ needs – from early accumulation right through to retirement. Yet two years on from the introduction of the Retirement Income Covenant, my understanding is that in this room we are still having the same conversation today.”
In one of her first public addresses to super sector leaders, Constant described super more broadly as “potentially the most important investment held by Australians” and funds as the “driving force in markets domestically”.
She specifically singled out the role played by super funds in influencing the “privatisation” trend in Australian markets, echoing previous sentiments from regulators about the transparency and frequency of unlisted asset investments.
Constant also took issue with the quality of consumer-facing websites maintained by funds, saying her assessment across the board since accepting the powerful commissioner role was that too many lacked important information and context, especially around death benefit claims and nominations.
“Unfortunately, though, our recent work in superannuation member services in relation to death benefits demonstrates that the website – your information front doors for…members – are clearly lacking in many cases,” Constant said.
“They’re inaccessible, they’re missing important information, and they don’t make life easier for your customers and their families for their life-changing moments.”
She challenged the funds in the room to navigate their own websites from the member’s perspective.
“Is it easy for your members to make those big decisions with comparisons and case studies? Is it accessible for the one in six Australians who have a disability or the one in four who speak a language other than English at home. Is it customer centric when they most need at those pain points in life.”
Constant said the regulator expects funds to communicate proactively and transparently with members, be accountable and deal responsibly with member money and deliver value and services to consistently meet their standards. “It’s pretty simple,” she said.
‘Pace of change could quicken’
Constant’s speech followed an address by APRA deputy chair Margaret Cole in which the prudential regulator said the industry had made some progress in meeting its Retirement Income Covenant obligations, but that the “pace of change could be quicker”.
She specifically urged funds to more proactively partner with life insurers, longevity product providers and other service providers to develop a strategy for retirement income.
But Cole also made clear developing a strategy for members was not sufficient on its own. Funds must also define what success looks like for retirement programs and strategies and be able to measure and communicate the effectiveness of their approaches.
“We encourage you to embrace the spirit of the Retirement Income Covenant,” she said.
Cole also noted that relying on external financial advisers was not a sufficient way to fulfil the obligations required by the covenant.
“All members, from high-net-worth individuals with independent financial advisers to low-balance members who are fully disengaged with their super, need to be supported by your strategy,” Cole said.
“Even where members are receiving independent financial advice, the obligation to meet the Retirement Income Covenant sits with you as the trustee, not with the adviser.”
* The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, the publisher of Investment Magazine.
