Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Spectre of talk-back radio looms on MySuper returns
(pictured: Rhys Octigan)
The introduction of quarterly reporting of MySuper fund options by APRA from this month may bring with it some unwelcome trends. Fund managers need to be prepared to have their numbers discussed on talk-back radio, for example. But managers and super funds can also take advantage of the extra data they are now collecting.
The Financial Services Council published last week its annual survey of the CEOs of funds management and insurance firms in Australia. John Brogden, FSC’s CEO, and Rhys Octigan, the head of regional business development for the survey’s sponsor, DST Global Solutions, gave a briefing on the survey results. The theme of the survey was ‘innovation’.
Brogden said that the extra publicity likely to follow the MySuper reporting – “it will bring it to the front page of newspapers and even talk-back radio” – meant greater competition and increased importance on a focus on members.
Octigan said: “If funds have to report more data to APRA they will look to also use that data to learn more about their customers.”
He said leading firms were already identifying new and strategic ways to leverage their investments in compliance to create innovative projects to provide competitive differentiation.
But fund managers admitted that they were ill-prepared for the expected increase in demand for retirement products. A total of 77 per cent said the financial services sector needed to do more to meet the needs of retirees. A similar proportion – 73 per cent – believed that technology was a key enabler to deliver innovative financial services products.
But with retirement products, there is a part to be played by the Government too, with the industry calling for reforms in the treatment of various types of annuities for years.
Brogden raised the prospect, as his counterpart at ASFA, Pauline Vamos, also did last week, of having a default MyPension option to supplement MySuper. He said, however, that it was unlikely that the Government would make pensions, versus lump sums, compulsory. It was more likely to have an “opt-out” system for at least disengaged members.
The survey was focused on the 70 CEO members, of the FSC’s total membership of 120, with 50 responding, which is considered an excellent response rate.
Brogden said he was pleased to see a specific response to questions on research which showed that a number of managers used universities as incubators of their research. Eight FSC members directly funded research at universities and a further eight have funds which invest in innovation.
“The challenge for managers is scale [because super funds invest in large mandates and research invariably requires lots of small sums of money], so it’s pleasing to see these innovation funds.”
The big issue facing FSC members though, which is not directly related to innovation, is the issue of trust. Brogden said the issue of trust came up in responses to the survey, although this had consistently been the case for several years.
“Now that FoFA is settled I’m hopeful that we can begin to rebuild that trust,” he said. “The real test for whether FoFA has worked will be in 12-24 months when we see whether more Australians are getting advice.”
He added: “I feel we are back to square one for the reputation and trust of advisors. What needs to be developed is a cultural shift.”
