You may already be aware that IOOF managing director Chris Kelaher and chair George Venardos stepped down from their respective roles two days ago.
They did so to fight APRA’s disqualification proceedings against them – along with chief financial officer David Coulter, risk and compliance general manager Paul Vine and general counsel Gary Riordan – which, if successful, would find them ineligible to be or act “as a responsible person of a trustee of a superannuation entity.”
The regulator also imposed additional license conditions on IOOF entities including IOOF Investment Management Limited (IIML) and Australian Executor Trustees Limited (AET). This was done, APRA explained, based on “issues and concerns … since 2015 relating to the entities’ organisational structure, governance and conflicts management frameworks, and require the entities to address these within specified timeframes.”
Following APRA’s announcement, IOOF’s share price dropped to a six-year low and the acquisition of ANZ’s financial planning business was cast into heavy doubt.
But that’s not the only thing that followed:
A new normal post-Royal Commission?
It’s worth noting that this is the first major action APRA has taken against a super fund since the Royal Commission, and it may well be a portent of things to come. The case also follows on from APRA calling for superannuation funds to better manage conflicts of interest, which stemmed from a review of 14 registrable superannuation entity (RSE) licensees.
This review found several areas where there was opportunity for improvement including ensuring related party contracts are for a set period and contain clear termination provisions, regularly monitoring “clear and measurable performance indicators” for third parties, and “proactively considering and documenting how decisions to use related party service providers are in the best interests of superannuation members.”
Before that, the regulator released findings of a review of superannuation governance practices in May. It would appear, through this IOOF case, that all these issues have now come to a head, and with greater scrutiny being placed on the super sector post-Royal Commission, it’ll be worth watching whether super funds are watched more closely henceforth.
APRA will take a harder line with member outcomes
Just after announcing its proceedings against IOOF, APRA unveiled a new package of prudential requirements for RSEs, targeted specifically at delivering to member outcomes. The central component, the regulator explained, is the introduction of an “outcomes assessment that will require RSE licensees to annually benchmark and evaluate their performance in delivering sound, value-for-money outcomes to all members – covering both MySuper and choice products.”
APRA deputy chair Helen Rowell said the regulator’s primary focus “is on the sound and prudent management of the $1.8 trillion APRA-regulated segment of the superannuation industry; that includes seeking to ensure that RSE licensees meet their obligations to put their members’ interests first.”
The outcomes assessment will involve RSE licensees assessing how well they’ve been providing outcomes to beneficiaries (members, in other words), whether they will be able to continue doing so and whether said outcomes could be improved.
This assessment must include:
- The outcomes RSE licensees seek to provide to members
- An explanation of how it has assessed its outcomes
- The metrics used in calculating outcomes
- A comparison of the above metrics to objective benchmarks in both absolute and relative terms
- Key factors affecting calculations, including investment strategy, insured benefits and the basis for member fees
- Analysis of the RSE’s capability of delivering to assessed outcomes in the future
- Analysis of whether these outcomes have been met previously
“These changes,” Rowell continued, “to the prudential framework set a higher bar for RSE licensees by requiring a robust assessment of the outcomes delivered for members to be reflected in their strategic and business planning.”
What will this mean for super?
If APRA’s going to take a more active – and perhaps prescriptive – role in managing superannuation, it stands to reason that there may well be more inquiries into specific funds going forward. Given the new target market determination rules coming into place for advisers recommending specific products, it’ll be worth keeping ahead of how these changes are implemented, and which funds meet the new standards.
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