Superannuation funds needs to clearly outline the member benefits of sponsorship arrangements, according to the Australian Prudential Regulation Authority (APRA).
The regulator conducted a review of 12 super funds which spent $87 million between 2018 and 2020, focused on advertising, sponsorship and promotions.
In its report, APRA said “there was a basis” for spending that amount but that too much expenditure had been made on qualitative judgement that it was the best interest of beneficiaries, rather than based on quantitative data.
Problems identified by the regulator included:
- Instances of registrable superannuation entity (RSE) licensees being unable to demonstrate how additional benefits associated with sponsorships, that were provided to directors, executives and staff of the fund resulted in any improved outcomes for members;
- Failure to rigorously measure and assess anticipated and achieved benefits to beneficiaries of expenditure on marketing campaigns and related activities;
- A lack of evidence of clear metrics to assess the benefits of marketing expenditure to their members;
- Limited evidence of ex-post review to demonstrate that the marketing expenditure had achieved its intended outcomes, again including the benefit to members; and
- An over-reliance on aggregate, or high level, considerations of marketing expenditure impact (e.g. changes in membership numbers) without demonstration of specific improved outcomes for members.
APRA said it expected the boards to play a greater role by approving marketing budgets, the business case and metrics for a marketing program. This would be supplemented by regular monitoring and reviews.
It also wanted funds to ascertain whether the average cost and benefit per member was appropriate for the circumstances and have a clear objective consistent with the sole purpose test. This should detail how the benefits would be measured in terms of improved member outcomes and be measured by clear metrics and a risk assessment on potential adverse impacts.
Super funds should also consider “additional benefits” included in sponsorship such as hospitality or corporate tickets and whether this presented a conflict of interest.
It gave the example of a fund which entered into a sponsorship agreement which included access for staff to sporting hospitality, as well as for employers whose staff were members of the fund in order to strengthen relationships with employers. However, it was unable to demonstrate how the additional benefits for directors and staff resulted in improved members outcomes.
Meanwhile, another arranged a sponsorship agreement which included corporate tickets and merchandise but could provide “no evidence of any improved outcomes” from the deal.
APRA said the fund should establish how actual or perceived conflicts would be avoided or managed, including by declining the additional benefits, and that the benefits were not for the sole benefit of directors, executives, staff or associates.