Regulatory change, inadequate post-retirement solutions for members and the negative impact of a sharp market fall on member balances are the key issues keeping APRA-regulated super fund trustees wide awake at night.
Issues around their fund’s operations and business, such as keeping technology current and finding and retaining talent, as well as hidden costs that erode returns – e.g. tax, foreign exchange, brokerage, low interest on cash – also have them tossing and turning during the night. These findings about the issues dominating their thinking emerged from a comprehensive survey by the Sydney office of the U.S. based adviser Parametric.
Trustees, executives and advisers from retail, industry, public sector and corporate funds weighed in on the topic ‘What Keeps Trustees Awake at Night?’ Quickly dubbed the ‘Insomnia Survey’, it drew its strongest response from funds with funds under management of between $5 and $10 billion. In addition, most respondent funds were industry funds.
Surprisingly, scale concerns – ‘our fund needs more scale in order to serve members better’ – ranked second-last in importance, with ‘losing my role with the fund’ bringing up the rear. The survey found that Trustees are more likely to lie awake worrying about their children, or other family issues, than scale issues or losing their role with the fund.
Chris Briant, CEO of Parametric Australasia, says, ‘the key themes for fund Trustees in 2016 will be dealing with an (ever) changing superannuation tax and regulatory landscape, developing post-retirement solutions for members, and employing investment approaches designed to immunise members against market volatility and falls.
‘Operational strategy, tax management and implementation efficiency are also likely to feature in funds’ 2016 strategic agendas,’ Briant adds.
Parametric organised the ‘Insomnia Survey’ as an adjunct to several of its research papers published in 2015 outlining solutions to many of the problems giving trustees sleepless nights.
Briant says, ‘we are pleased to see the results vindicate Parametric’s focus on connecting funds with new solutions that really work. Examples are helping funds to manage tax and clean up implementation leakage through Centralised Portfolio Management, providing a more efficient pension asset segregation approach and assisting funds build ‘CIPR’ retirement solutions that balance “attack” and “defence” for members.’
Graeme Mather, Mercer’s Retirement and Investments Consulting business leader (Pacific), commented on the Parametric survey, saying he was not surprised that regulatory change and the adequacy of post-retirement solutions were chief among the concerns of trustees.
He added that, ‘regulatory change will be both a challenge and an opportunity for the industry in the immediate future, and Mercer is in ongoing discussions with the industry, Treasury and the Government on relevant matters.’
‘We believe the super industry needs more competition, more innovation in retirement income products, and more freedom to communicate with members in a meaningful way that will help lift financial literacy and consequently improve retirement outcomes.
‘Until recently, with the introduction of solutions that pool longevity risk such as Mercer’s LifetimePlus, Australians have had very few cost-effective and flexible investment options to ensure their super lasts for as long as they do.
‘We’re beginning to see the superannuation industry shift its focus from accumulating wealth to providing an income throughout retirement, but there’s a long way to go.’
