APRA-regulated space filled with conflict

There is considerable self interest, conflict of interest, poor decision making, and underperformance in all parts of the Australian Prudential Regulation Authority (APRA)-regulated space, whether it is banks and other parts of the retail sector, or other sectors of the entire industry.

That was the opinion of APRA deputy chairwoman, Helen Rowell, who told a thought leadership breakfast at the 2017 SMSF Conference in Melbourne on Wednesday that APRA was particularly focused on identifying parts of the industry that had not tackled conflicts and eradicating such practices.

"At the end of the day I think it all comes back to really honing in and focusing on what's in the members' best interests rather than what's in the interests of the institution itself or the participants in the institution that have gained themselves from it," Rowell said.

Rowell also said underperformance of funds was an area of focus for APRA, with its recent annual statistical bulletin showing some funds were now in negative cash flow, which was unsustainable.

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Rowell told an Association of Superannuation Funds of Australia conference last year that trustees should be looking at particular metrics to assess if they were underperforming and fix their issues.

"One of the questions I got was ‘when is APRA going to give us the numbers so that we can figure out whether we're underperforming!' That's just extraordinary," she said.

"The trustees have an obligation to get on top of this stuff. If you're a trustee on a board that is getting paid a directors fee but you're actually sending members out backwards that's not in the industry's interest, it doesn't build trust and it doesn't build confidence."

Rowell also said default funds and base products should deliver for everyone regardless of the choices they have made.

She said there was significant room for improvement in terms of costs, insurance performance, and under performers who needed to improve their performance.