Superannuation has not dodged the regulatory bullet

30 August 2019
| By Mike |
expand image

Despite Australia’s continuing “twin-peaks” regulatory model, for most of the past two decades superannuation funds have only ever worried about one regulator – the Australian Prudential Regulation Authority (APRA).

That has clearly changed. The Australian Securities and Investments Commission (ASIC) has now been given greater powers to deal with conduct issues relating to superannuation funds and has made clear its intent to exercise those powers.

If anyone in the superannuation industry doubted this, they need only have listened to ASIC chair, James Shipton’s address to last month’s Financial Services Council (FSC) Leaders Summit in Sydney where he spent a substantial portion of his time detailing the regulator’s approach to trustee misconduct, insurance in superannuation, advice in superannuation and financial loss caused by underperformance.

They might also have cared to closely read the speech delivered by the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume to the same forum where she said the Royal Commission had showed that “superannuation funds were not outside the misconduct that plagued the financial sector”.

Hume said the Government was “going to reframe the superannuation system so that it workers for members.

So, while many in the superannuation industry may believe that it escaped relatively unscathed from the Royal Commission, they may care to consider the manner in which what was not traversed at the Royal Commission may yet be traversed by ASIC.

Shipton said in his FSC speech that the regulator would be looking particularly “at trustee behaviour that causes monetary loss to members, financial exclusion, loss of market integrity and confidence, and behaviour that undermines competition”.

He said ASIC was also putting trustees on notice where there was persistent underperformance. 

“Consumers expect super trustees to act in their best interests to improve retirement incomes – consistent underperformers are clearly not doing enough. While underperformance is not illegal, it is frequently caused by conduct that does breach the law e.g. conflicts of interest, failure to act in members’ best interests, or lack of diligence by trustees,” he said.

“ASIC will consider persistent underperformance as a key indicator and red flag to help target our work to identify misconduct.”

So, irrespective of whether a fund is a retail master trust or an industry fund, its trustee board should expect that it will come under scrutiny if its investment returns fail to keep pace. What is more, APRA’s deputy chair, Helen Rowell, has consistently told Parliamentary Committees and other forums that a number of industry funds would also be counted amongst the underperformers.

Also to be considered is the fact that APRA, itself, found it necessary to release its updated Corporate Plan with the message that it will be applying a “sharpened focus on regulating non-financial risks and improving outcomes for superannuation members”.

So the message for superannuation fund executives and trustees is that the industry may, indeed, have dodged a Royal Commission bullet, but it may have been looking at the wrong gun.


Submitted by Bear on Thu, 10/24/2019 - 13:28

So the message for superannuation fund executives and trustees is change most of your investment choices to you cannot underperform.
So what exactly are examples where super funds regarding investment performance have conflicts of interest or failed to act in members’ best interests??? Dont get it. Fund managers with rip off fees choose where to investment peoples money. Super funds just largely administer it.

Add new comment

The content of this field is kept private and will not be shown publicly.

Recommended for you

sidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

2 months 1 week ago
Kevin Gorman

Super director remuneration ...

2 months 2 weeks ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

2 months 2 weeks ago

In an address to the G20 Economic Ministers Forum in Brazil last week, the Treasurer spoke of weak economic growth as the balance of risks in the economy shifts slowly aw...

3 days 10 hours hence

The $125 billion fund has welcomed a senior Morningstar executive for a new policy and advice role....

11 hours hence

Ausbil’s Global SmallCap team looks at this generational change in power markets and discovers opportunities for unrecognised growth in global small-cap markets.The world...

4 years 1 month ago