A continued regulatory focus on member outcomes will dominate the superannuation industry in 2018 and contribute to the continued consolidation of funds, says Mr Jonathan Steffanoni, Principal Consultant, Legal & Risk, QMV.
“While smaller funds are seen as the natural candidates for mergers, some larger funds may also look at consolidating their position and promoting scale efficiency and bargaining power for members by way of merger,” he says.
The regulatory landscape is likely to continue to demand the attention of the superannuation industry in 2018 with a number of key themes and trends set to dominate, including:
Data availability and use
“We are likely to see a continued trend towards empowering members to have greater access and control over the data which is held about them,” Mr Steffanoni says.
“The Productivity Commission’s report on data availability and use was delivered in 2017, and the “Open Banking” regime announced in this year’s Federal Budget is already in motion.
“While Open Banking may provide some competitive opportunities for integration in the short term, the prospect of louder calls for Open Super or Open Pensions should not be far from the top of the strategic planning agenda for superannuation fund trustees.”
Member value and outcomes
“APRA’s expanded powers and increased focus on member outcomes are likely to see superannuation funds upgrading strategic key performance indicators, monitoring measures and reporting functionality to align with APRA’s member value and outcomes criteria,” Mr Steffanoni says.
“While there are already a small group of superannuation funds under regulatory scrutiny in relation to member value and outcomes, the focus for most of the industry is likely to be directed towards ensuring that activities and investments contribute to member value and outcomes.”
Default model, competition and efficiency
All eyes will be on the Productivity Commission findings from the third phase of the Inquiry into Competition and Efficiency in the Superannuation System, due in mid-2018.
Mr Steffanoni says superannuation funds will need to closely monitor the recommendations as they may pave the way for reforms to the default model, in particular, and require changes to the way funds deal with this sector.
New complaints handling model
“The transition from the Superannuation Complaints Tribunal to the Australian Financial Complaints Authority is still being legislated, and there’s still a reasonable amount of uncertainty around this,” Mr Steffanoni says.
“Despite this uncertainty, the replacement of the Superannuation (Resolution of Complaints) Act with internal dispute resolution code is going to require the attention of the service and operations aspects of superannuation funds and administrators.”
Conduct scrutiny and enforcement
There is no doubt that the continued political and public interest in conduct in the financial services sector will continue into 2018, Mr Steffanoni says.
“Continued enforcement of conduct related compliance obligations is likely to contribute to an environment where there are lower appetites for reputational and compliance risks.
“Aside from the prospect of a Royal Commission directed at financial institutions, superannuation funds will need to ensure standards of conduct in claims handling and management remain compliant and aligned with community expectations of the financial sector.”