Pauline Vamos argues that 2013 is the dawn of a new era for superannuation, and that the industry will cater to those who own it – the members.
Year 2013 will be the year of transformation in which Stronger Super implementation, Future of Financial Advice (FOFA) commencement, account consolidation, new product innovation, higher disclosure standards, greater competition, fund mergers and increased accountability will all play their part.
The first half of the year will be focused on implementation. It will be busy, difficult and frustrating.
The management of this implementation process, both at an individual fund level and association level, is going to be vital.
The importance of getting it right will drive all parties to step up communication and engagement. For the Association of Superannuation Funds of Australia (ASFA) this will mean markedly increasing scheduled meetings with regulators, establishing more member discussion forums and collecting detailed scenarios on unintended consequences from ASFA members.
Let’s start with MySuper. As operational managers engage with regulatory detail and trustees engage in deep talks with the Australian Prudential Regulation Authority (APRA), differences in interpretation will emerge – indeed, they are already emerging.
As often happens with the implementation of legislation after a long consultative process, the stated or anticipated policy intent gives way to hard legal interpretation which sometimes reveals a very different outcome, throwing planning into disarray. There is already a significant issue where an employer pays fund fees for some employees and not others.
The first half of the year will also be SuperStream time. Some requirements commence 1 July 2013 and, even though it will be a staged implementation, the impact of SuperStream is starting to be realised.
Unfortunately there have been so many side conversations, Chinese whispers and lack of clarity that orderly decision making is not happening. Dare I say it, had a governance body been set up as was strongly advocated by ASFA, we would be in a much better position.
In any process where data protocols and electronic transactions are being standardised across an industry, there will be significant impacts.
We are starting to see funds with already efficient systems having to redo them, not necessarily making them better but changing them to the new standard. We have other funds that need to dramatically change their processes to become electronic and standardised.
These projects are immense, costly and have now moved beyond the technicians. SuperStream is a game changer.
It will impact business and as such business heads and CEOs are now being forced to become engaged. Not least of these developments are the new contracts with new providers such as gateways. Any new commercial arrangements need time to implement.
The year will also see what I call the “clean up and clarification” process.
Product dashboards, portfolio disclosure, portfolio look-through and data collection are all issues that need to be nailed in the next few months.
We have a long way to go, and again what I think we will see is frenetic energy in many of our discussion groups and committees as we try to come to some agreement, and then convince the regulators to come to the party.
As the year progresses we will start to see the results from many of these changes. MySuper will be launched. The battle to keep the member will be raging. Mergers would have been decided and many people will be looking at their future role in the industry.
The pace will be just as intense as the early part of the year but it will be different. Strategy will again be a top priority at board tables. Reviewing governance processes, member communications and investment and product strategies will be filling the agenda.
In terms of innovation, I think we will see it mostly in member communication and advice and MySuper. Intra-fund advice opens up a new doorway. Funds, as they have transformed their products, would have moved on to new platforms, giving them new flexibility.
We started to see the emergence of new communication initiatives in 2012. This will be escalated in 2013. The experts now employed by funds across all sectors in the marketing and communications areas will be setting new benchmarks. FOFA will be in – and the relationship between the super industry and the financial planning industry will become more intertwined, giving rise to new business models.
By the end of the year we will see a leaner, stronger and more focused industry. The impact of account consolidation, changes to the Fair Work Act and ageing demographics will have made their mark.
Year 2013 is the dawn of a new era for superannuation, and the industry must look at its brand. We do not own the industry – and stakeholders, academics and others are questioning the system and the industry. The community owns super – and they are flexing their muscles.
In this column last year my opening words were, “This year will bring an opportunity for the super industry to rebrand itself”. The industry was rebranded by others, and the rebrand is not one we want to keep.
We came through 2012 as an industry that is regarded as being divisive, self-interested, unsophisticated and not delivering to members.
This must change. The mantle of being a big industry with the big responsibility of delivering value to fund members and doing public good must now be taken on by the industry as a whole.
We must start from the position that we are all fiduciaries. The role of ASFA is to advocate policy and regulation that enables fiduciary responsibilities to be met and provide services and best practice papers that drive and support the highest fiduciary standards.
The business of superannuation is different to others and its uniqueness will become more apparent as the new governance and regulatory settings make their mark. In my mind 2013 is the year that we as an industry define and deliver what a fiduciary in a defined contribution pension world is.
Pauline Vamos is the chief executive officer of ASFA.
