super review - september 2010

Superannuation fundtrustees need to takeaccount of changed cir-

cumstances when dealingwith the death benefit nom-inations of members, ac-cording to a recent determi-nation handed down by theSuperannuation ComplaintsTribunal (SCT).

The determination saw theTribunal overturn the decisionof a Trustee on the basis thatthe fund member had signedthe death benefit nominationnearly 16 years prior to herdeath, and it had failed to takeaccount of her changed cir-cumstances (specifically, amarriage).

The SCT’s decision madeclear that superannuationfund trustees had to be moreproactive in seeking to makecontact with members overtheir changed circum-stances, and can not simplyassume that letters had beenreceived.

The case heard by the Tri-bunal in July revolvedaround a decision by the su-perannuation fund trusteeto pay death benefits to themembers’ parents ratherthan to her husband be-cause she had nominatedthe parents as her benefitrecipients when she had

joined the fund in 1991.The Tribunal panel, which

included SCT chair JocelynFurlan and leading super-annuation lawyer NoelDavis, overturned theTrustee’s decision on thebasis that notwithstandingthe member’s original nom-ination, the fund had failedto recognise the husband asa ‘Dependant’ for the pur-poses of the SuperannuationIndustry (Supervision) Act(SIS Act).

“Under section 10 of theSIS Act, the word ‘Depen-dant’ is defined as includingany person with whom theperson in question had aninterdependency relation-ship,” the Tribunal said.

“One of the requirementsfor there to be an interde-pendency relationship be-tween the deceased memberand her parents is that theywere living together. That wasnot the case. Consequently, it

is the Tribunal’s view thatthe parents were not in aninterdependency relation-ship with the deceasedmember within the meaningof the SIS Act and there isinsufficient evidence thatthey came within any of theother elements of the defi-nition of ‘Dependant’ in theSIS Act,” the Tribunal said.

It said that although theparents had been nominatedby the deceased member toreceive her benefit, “thatnomination was made wellbefore her marriage”.

“Furthermore, in order forthe Trustee to be able togive effect to the nomina-tion and pay a benefit to theparents, the parents had tocome within the definitionof ‘Dependant’ in the trustdeed. It is the view of theTribunal that there is in-sufficient evidence that theparents came within thatdefinition.” SR

T H E L E A D I N G I N D E P E N D E N T J O U R N A L F O R T H E S U P E R A N N U A T I O N A N D I N S T I T U T I O N A L F U N D S M A N A G E M E N T I N D U S T R Y

10 2010 ELECTIONShould the industry be feeling alittle green?

For the latest news, visit superreview.com.au

11 FRAUDThere’s more to super benefitspayments than meets the eye

14 TECHNOLOGYRiding the wave of technologicalinnovation

A recent determination handed

down by the Superannuation

Complaints Tribunal should serve as

a warning to trustees that they must

be up to date with their members’

changing circumstances.

Time catches up with tardy trustee

Prin

t Pos

t App

rove

d PP

2550

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MANDATES 2 NEWS 3 EDITORIAL 10 TECHNOLOGY 14 ADMINISTRATION 18 APPOINTMENTS 23 EVENTS 23

SEPTEMBER 2010 Volume 24 - Issue 8

The SCT’s decisionmade clear thatsuperannuation

fund trustees had tobe more proactive in

seeking to makecontact with members

over their changedcircumstances.

18 ADMINISTRATIONNavigating a changing superan-nuation landscape

2 PAGE TWO www.superreview.com.au

SUPERREVIEW * SEPTEMBER 2010

MandatesRecieved by Type of mandate Issued by Amount

Acadian Asset Management Managed volatility AUSCOAL Super $97.5 million

HSBC Custody Erste NA

Metlife Insurance Statewide Super NA

SEPTEMBER 2010 * SUPERREVIEW

Aviva gets top Heron ratingINDUSTRY funds have found themselvesleft out of the list of top-ranked super-annuation funds in the latest HeronQuality ratings.

The ratings, released this month, re-veal the Aviva – Navigator Personal Re-tirement Plan as the top-rated offeringin the personal products category, withING Corporate Super leading with re-spect to corporate products, AMP Sig-natureSuper topping the list of pen-sion products and AUSfund once again

being named the best regarded eligiblerollover fund (ERF).

Commenting on the findings, HeronPartnership managing director ChrisButler said it was the first occasion onwhich Aviva’s Navigator Personal Re-tirement Plan had been crowned as thetop-rated personal product, while INGCorporate Super had been named thetop-rated corporate product on eightoccasions.

The Heron process found 54 products

in the personal/retail category warrant-ed its top five-star rating denoting ‘out-standing quality’, while 25 corporate prod-ucts gained a five-star rating along with41 pension products.

By comparison, just three ERFs earnedthe five-star rating: AUSfund, ISPF ERFand SuperTrace.

While industry funds failed to be rankedas top-rated products, they were well-rep-resented in the five-star categories, rep-resenting 19 of the 54 products. SR

AUSCOAL’s Bruce Watson named FEAL Fund Executive of the YearAUSCOAL Super chief executive BruceWatson has been named the winner ofthe 2010 Fund Executive AssociationLimited (FEAL) Fund Executive of theYear Award.

The award, in partnership with AMPCapital Investors, recognises out-standing leadership and achievementby a fund executive within the Aus-tralian superannuation industry, ac-cording to AMP.

Watson was selected by a panel ofindustry leaders and peers for demon-strating innovative and outstanding lead-ership in responding to the needs of the

fund and its members during a chal-lenging year, AMP said.

AMP Capital Investors’ business di-rector client, product and marketing,Brian Delaney said Watson had shownextraordinary leadership in identifyingand responding to the needs of AUS-COAL Super’s 65,000 members to ensurethey receive the maximum benefit fromtheir superannuation.

“Bruce’s hands on approach togeth-er with his passion and commitmentto staff and clients make him a well de-serving recipient of this award,” he said.

Watson will receive a $20,000 educa-

tion grant to study at an international-ly recognised business school as partof FEAL and AMP Capital’s commitmentto supporting professional development,AMP said.

AUSCOAL chairman Arthur Westoncongratulated Watson for his leadership,member focus and innovation.

“Over the last five years Bruce hasdemonstrated inclusive, yet decisiveleadership. He has devoted his time toa number of important strategic issues,identified significant growth opportu-nities and achieved breakthrough re-sults by constantly searching for new

and better ways to understand and meetthe needs of AUSCOAL Super membersand employers,” he said.

Watson said it was a privilege to beamong such an esteemed group of priorrecipients and paid tribute to the workand support of the AUSCOAL Superteam.

He also credited Weston and thankedhim for his nomination, and thankedAMP for supporting the awards.

“One of the great achievements in fiveyears as CEO has been to implement andsee the rewards of a wonderful leader-ship training program,” Watson said. SR

www.superreview.com.au NEWS 3

Chris Butler

Master trusts outperformindustry funds

By Chris Kennedy

COOPER Review recom-mendations that assets beingtransferred into a self-man-aged super fund (SMSF) besold first then rebought bythe SMSF unless no marketfor the assets exists are un-fair and inconsistent, ac-cording to Chris Morcom, di-rector and adviser atHewison Private Wealth.

“If you have to sell assetsto transfer them into super,you’re going to have a situa-tion where you sell them onthe market, wait for them tosettle, then you’ve got totransfer the cash into thesuper fund – it may be a weeklater you’re buying the cashin the super fund, anything

could happen,” he said.If an investor with a

$450,000 contribution cap waslooking to transfer the entireamount into a SMSF in theform of equities, that wouldcreate a substantial amount ofrisk that many investors wouldnot be willing to take.

“It’s unfair to limit [SMSFs]to that sort of thing whenthere’s these black pools op-erating that large organisationscan use to facilitate transac-tions of market related secu-rities without the market know-ing what’s going on – it’s outsideof market regulation almost. It’sour view that this needs somemore attention,” Morcom said.

It was also nonsensical thatfor other assets where no un-derlying market existed, the

recommendation was to allowthose to be transferred pro-vided they were valued by anappropriate valuer, he said.

“A commercial property[has] no underlying market butif you get it valued by a valueryou can transfer it in. There aredifferent rules for different as-sets and that doesn’t seem tomake sense,” Morcom said.

Morcom agreed the cur-rent rules needed to bechanged as the transfer win-dow was too large, meaninginvestors had too much dis-cretion about when theychose to complete the trans-fer. Theoretically, they couldbackdate a transfer to whena share price was lower, min-imising capital gains tax.

He suggested a system ofelectronic transfers that trans-ferred the assets instantly atcurrent market price couldsolve the problem, possibly fa-cilitated through the registriesor the Australian SecuritiesExchange. SR

A RECOVERING share market inJuly again helped retail mastertrusts to outperform industryfunds, according to the latest datacompiled by Chant West.

According to Chant West prin-cipal Warren Chant, master trustsoutperformed industry funds forthe 13th time in 17 months on theback of the stronger performancein listed markets.

Despite this, he said industryfunds continued to hold an edgeover the longer term, outperform-ing retail master trusts by 1.3 percent a year.

The Chant West analysis re-vealed that the median growth su-perannuation fund delivered a re-turn of 2.2 per cent in July, withthe main drivers being stronger USmarkets and a 4.5 per cent risein the Australian share market.

However, Chant warned su-perannuation fund returns stillhad some way to go before they re-covered to the levels experiencedbefore the global financial crisis.

“While funds have rallied 22 percent since the end of February 2009,they still need a further 13 per centreturn from here to get back to thelevels of late October, 2007,” he said.

Chant said this might take sometime because economic data com-ing out of the US indicated a sub-dued outlook. SR

Cooper’s SMSF asset transferrules unfair: Hewison


THE core/satellite equity managementapproach popular with many super fundshas underperformed other active man-ager styles, particularly in the high volatil-ity environment seen in the past fewyears, according to Ankura Capital.

In a summary analysis derived fromthe Mercer return database coveringthe past five years and showing rela-tive over or underperformance ofgrowth, value, core, quantitative andmulti-manager strategies, multi-man-agers populate the lower end of thetable, with value and growth domi-nating the top end.

The entire sample of active man-agers have a better record than thepassive option in the analysis, evenafter the passive approach is given a30 basis points bonus taking into ac-count the lower fees.

The underperformance of highvolatility managers since the onsetof the global financial crisis combinedwith the consistently lower returnsof passive management means thecore/satellite approach is potentiallyembracing a “worst of both worlds” ap-proach, according to Ankura Capitalmanaging director Greg Vaughan.

“The worst thing you can do, based onthis analysis is to have a passive corewhich suggests you’ll almost definitelyunderperform everyone, and then putthat together with high volatility man-agers and attempt to compensate for thepassive core,” Vaughan said.

Funds use passive managers to di-lute the higher fees of active man-agers and that is where they can getinto trouble, he said. Because passivemanagers are almost guaranteed to

underperform, funds with a passivecore need to outperform dispropor-tionately to compensate.

Many large funds have opted to re-visit passive cores because they havebeen frustrated with the performanceof their manager mix, but they wouldbe better served building a core aroundmoderate risk core managers, Vaugh-an said.

“You really only want a core which isperforming in line with the active re-turn that’s out there. Having a widernumber of moderate volatility man-agers has been a more successful ap-proach over recent years,” he said.

A breakdown of high, moderate andlow volatility managers into 66 rollingthree year periods showed that priorto September 2007, high volatility man-agers beat the median in 80 per cent

of the periods, but since then, mod-erate volatility managers outperformedhigh volatility managers in 85 per centof the intervals. Low volatility man-agers beat the median performanceless than 20 per cent of the time acrossthe overall analysis. SR

Fund managertail waggingsuper dogTHE funds management industry hasagain been described as the tail wag-ging dog of the Australian superan-nuation sector.

Towers Watson’s global head of in-vestment content, Roger Urwin, toldlast month’s Fund Executives Asso-ciation Limited (FEAL) conferencethat the superannuation industry hadan old and outdated infrastructure thatraised the question of whose interestswere really being served by the re-sultant “expensive machine”.

“We do have a funds industry thatwags the retirement industry dog,”he said.

Referring to the recommendationsthat flowed from the Cooper Review,Urwin said Cooper might not haveplayed every card skilfully, but didwell with a weak hand.

“We have many investment prod-ucts where the costs are too great tocome out ahead for the value deliv-ered,” he said. “We account too op-timistically and self-servingly for theskills and talents of certain invest-ment segments.

“In doing so, we all too often servethe interests of the industry, not themember,” he said. SR

Mercer launches retirement income calculatorMercer has launched a stress test calculatorthat will help members of Mercer Super Trustassess their superannuation and predict theimpact events such as share market volatili-ty and a career break will have on their re-tirement income.

Heather Dawson, partner at Mercer, saidretirement income calculators helped increasesuper fund member engagement. Mercer’s Re-tirement Income Simulator provides a per-sonalised forecast that takes into account allincome sources, contributions, rollovers andinvestment strategies and allows membersto apply various strategies to bridge any gaps,she said.

“It’s very powerful for members to see howtheir contribution patterns and investmentstrategies can influence the income they willhave in retirement. Mercer’s Retirement In-

come Simulator shows people in very clearterms what they can achieve by working longeror saving more,” she said.

The simulator also features a stress test,which helps members to see the impact of stockmarket movements on their retirement income,she said.

“Australians are now more attuned to theimpact that share market volatility has on theirsuperannuation balance but we felt it impor-tant to help them understand the impact overtime and on their actual income in retirement,”she said.

The stress test is based on 10 different sce-narios for each investment option from Mer-cer’s Capital Market Simulator investmentmodel, meaning members see 10 possible out-comes ranging from a best-case to a worst-casescenario, Dawson said. SR

Dimensional boosts investment and compliance teamsDIMENSIONAL has expanded its in-vestment and compliance teams,adding portfolio manager Thomas Reifand compliance manager Rod Mair.

Reif joins Dimensional from JP Mor-gan where he was director of quanti-tative research, and brings 16 years ofportfolio management experience. Healso worked with State Street GlobalAdvisors, Deutsche Bank in New Yorkand Bankers Trust in Sydney.

Reif will report to Dimensional’s

head of international portfolio man-agement, Graham Lennon.

Mair worked most recently as re-gional head of risk and complianceat BGI/Blackrock, and prior to thisworked with Perpetual Trustees andthe Australian Stock Exchange.

Mair will report locally to the headof finance and compliance, StephenPalmer, and internationally to theglobal head of compliance, Christo-pher Crossan.

“Rod has built an extensive knowl-edge of our industry and a real depthof understanding of the contributioncompliance makes to the growth andeffective operation in the funds man-agement business,” said DimensionalAustralia chief executive Glenn Crane.

Dimensional manages more than $15billion for clients in Australia and NewZealand and has approximately $180billion in assets under managementglobally. SR

Ankura shoots down core/satellite approach

4 NEWS www.superreview.com.au

Greg Vaughan

Heather Dawson

Emergingeconomiesa goodhedgeINVESTORS should lookto emerging markets tohelp counter the nega-tive demographic pat-terns emerging in the de-veloped economies,according to BarclaysCapital’s head of re-search, Larry Kantor.

Addressing the Port-folioConstruction forumin Sydney last month,Kantor said that demo-graphic patterns hadturned very unfavourablein developed economies,with ageing populationsmeaning economicgrowth was going to belower for the next decadeor two.

He suggested that toovercome this issue, in-vestors needed to in-clude emerging mar-kets in their portfoliosin circumstances wherethe demographic issueswere not nearly as se-vere and where the fis-cal problems were notso severe.

“Most of the emergingmarket budgets are ac-tually in pretty goodshape,” Kantor said.

He suggested that in-vestors should also notbe in the business ofavoiding risky assets,even though volatility ishigh. SR

Praemium eyes SMSF market growthPLATFORM providers Praemium aretargeting a 10 per cent share of theAustralian self managed super fund(SMSF) market in the next threeyears from its current level of four percent of SMSFs administered, accord-ing to group chief executive ArthurNaoumidis.

Praemium will try to attract an in-

crease in SMSF business through acombination of changes to the group’sV-Wrap platform, positional productchanges, changes to the investmentregister and improvements to the in-terface with the compliance software,Naoumidis said.

One of the most important aspectsof Praemium’s push into the SMSF

market will be its SMARTwrap prod-uct, which will allow the group to tar-get the remaining 90 per cent of themarket rather than just advisers whoseclients are wealthy enough to investdirectly in wholesale or direct equityproducts, Naoumidis said.

With incoming fiduciary duty re-quirements advisers would have to jus-

tify putting clients into a product thatcost twice as much as SMARTwrap,Naoumidis SR

In this market, speed and accuracy have never been more critical. Fortunately for you, Northern Trust’s innovative, fully integrated technology provides access to timely data for faster, better decisions on a rapidly moving global stage. Northern Trust Passport®, for example, is a market-leading, customisable portal that gives you instant access to data and lets you drill down on demand. That’s just one of the many reasons why InformationWeek has named us One of the Top 100 Technology Innovatorsfor five years running. To learn more about our latest innovations, call Paul Cutts at +61 3 9947 9302 or visit northerntrust.com/innovation.

© 2010 Northern Trust Corporation. Northern Trust operates in Australia as a foreign authorised deposit-taking institution (foreign ADI) and is regulated by the Australian Prudential Regulation Authority. Northern Trust in Hong Kong is a securities company regulated by the Securities and Futures Commission. Northern Trust in Singapore is a foreign wholesale bank regulated by the Monetary Authority of Singapore. Northern Trust

operates in China as a Representative Office and is regulated by the China Banking Regulatory Commission.

Our innovativetechnology is fast and accurate. So are the investors who use it.

Asset Servicing | Asset Management



ArthurNaoumidis


SUPERANNUATION fund memberswould be better off remaining in today’sindustry funds than being tipped intothe proposed MySuper default option,according to leading superannuationresearcher Warren Chant.

In an analysis released last month,Chant said MySuper could result inAustralian workers receiving lower su-perannuation payouts rather than thehigher outcomes suggested by theCooper Review.

Chant, the principal of Chant West,said while the MySuper concept had a

certain superficial appeal, it failedto recognise that there was a differ-ence between price and value.

“In super, as with most things in life,you get what you pay for,” he said.“Sometimes it is better to pay a littlemore if that means the product per-forms better and lasts longer – andthat’s what you want from super.”

Chant said the Cooper Review rec-ommendations had treated superan-nuation as a homogenous productwhere the only differentiating factorwas price, but this was not the reality.

“There are qualitative differencesbetween funds. The better qualityfunds, in terms of investment per-formance, tend to have higher invest-ment fees because of how they investand what they invest in,” he said.

“But there is strong evidence thatthose higher investment fees pay offbecause they produce better returns,”Chant said. “In other words, the ad-ditional return is greater than the ad-ditional fee incurred to achieve it.”

He said the forecast cost savingsfrom MySuper were hugely optimistic

and were likely to be eclipsed by thereduction in benefits resulting from re-duced returns. SR

INVESTORS appear to have hedgedthe bets on the question on recov-ery, according to new research re-leased by Mercer.

The Mercer analysis, containedwithin its Dynamic Asset Alloca-tion report, claims the market haseffectively priced in both theprospect of recovery and the risks ofit being derailed, with most assetclasses rated ‘fair’.

Commenting on the research, thehead of Mercer’s Dynamic Asset Al-location team in Australia, DavidStuart, said the recent choppinessin markets could continue for sometime, but that Mercer was not ex-pecting a repeat of 2008.

“While there is a talk of a dou-ble-dip recession, as we are hearingfrom some of the bearish commen-tators, Mercer believes market val-uations have priced in big picture

risks,” he said.Stuart said Mercer’s view had not

changed substantially since it re-leased an earlier report at the be-ginning of the year.

“We felt at that time that the roadto recovery would be rocky, and thathas proved to be the case, particu-larly for equities, however it con-tinues to trend upwards,” he said. SR

Increased SG overshadowed by electionA HARD-FOUGHT campaign to raise the superannu-ation guarantee (SG) is in danger of being lost as aresult of the election, according to Australian LaborParty (ALP) strategist Bruce Hawker.

“One of the things that differentiates the two par-ties is the question around superannuation and it allrevolves around the issue of the mining tax,” he saidat the Association of Superannuation Funds of Aus-tralia (ASFA) lunch in Sydney last month.

He described the tax as “an incredibly vexed issue”,which at its heart proposed to provide tax cuts tobusiness, with particular benefit to small business, extrainfrastructure and, most importantly, to assist with aphased increase in the SG from 9 per cent to 12 per cent.

“I think that’s something which has been lost entirelyin other issues like Mark Latham,” Hawker said.

A very important aspect of people’s lives going intoretirement was at stake, and if Opposition Leader Tony

Abbott is elected, there won’t be an increase in the SG,he said.

“A lot of people around the country will probably startto think about this issue at some time. Part of signingup to the mining tax is that Australians can get theirfair share in various ways, and one of these is the in-crease in the guarantee. By 2030 something like $500billion will be injected into the Australian economyin that way.” SR

THE retirement income of Australiansis being influenced by emerging marketeconomies, but the benefits being gainedcome with a volatility risk, according toAccess Economics director ChrisRichardson.

Easing economic stimulus from de-veloped nations will slow the current-ly rapid growth being seen in Asia, andthe cheap money that was flowing in mayhave led to property bubbles that coulddeflate unevenly, creating a volatilityrisk for Australia.

There is also a big question mark overwhether commodity prices will be ableto stay at their current levels over thelonger term, he said.

“China will have a bad year and whenthat happens Australia will have a verybad year,” he warned.

Australia can most likely look forwardto strong growth in China for the next10 years, and in India for the 10 yearsafter that, but he said “India will notbe the next China” because it won’t seethe same demand on heavy industry.

But with continuing growth and de-mand for Australian resources, “Asiameans prosperity for Australia,” Richard-son said.

Australia would also be wise to use thebenefits being earned now while themarkets are strong to plan for the futurein the form of an increased superan-nuation guarantee (SG), he added.

From an economist’s point of view, in-creasing the SG isn’t right or wrong be-cause it makes people better off in re-tirement at the expense of being worseoff now, he said.

But with people living longer and re-tirement likely to go on for longer thanpeople anticipate, that myopia is a rea-son to consider increasing the SG, hesaid.

The average Australian’s retirementincome was currently around 70 per centof their pre-retirement income, but in60 years, once everyone had spent theirwhole lives working under a 12 per centSG, that was likely to increase to 75 percent, he said. SR

MySuper not so super6 NEWS www.superreview.com.au

Warren Chant

David Stuart

A dollar eachway on recovery

Aussie retirement incomes influenced by Asia

AustralianSuper recruiting for new internal investment roles


AUSTRALIANSUPER will be look-ing to fill four new internal investmentroles that were created to boost thefund’s internal investment capabilities.

The positions – head of infrastruc-ture, head of equities, Asian invest-ment expert, and governance special-ist – have been in the works since atleast 2008 and are part of a long-planned expansion, according to Aus-tralianSuper chief investment officerMark Delaney.

All of the new roles will fit within theexisting teams, and will also have over-arching responsibility for the teams,Delaney said.

Since the establishment of Aus-tralianSuper in 2006 from a mergerbetween Australian Retirement Fund,

Superannuation Trust of Australiaand FinSuper, funds under manage-ment have grown by 50 per cent, hesaid.

“We anticipate that they will dou-ble in the next five years and we needto ensure we continue to be in thebest position possible to take advan-tage of this scale for our members,”he said.

The appointment of an Asian spe-cialist was especially significant, De-laney said.

“AustralianSuper has long recog-nised the importance of Asia from aninvestment perspective and this newrole will enable us to benefit fromgrowth in this region. This person willidentify and assess opportunities and

investment partners in the region.”The governance specialist role will

ensure appropriate governance of the

fund’s investments, work to improvecorporate behaviour in investment ve-hicles and integrate active investorconsiderations in the investmentprocess, he said.

The fund had only just begun the re-cruitment process but would be ad-vertising for the roles, possibly using arecruitment agency and using all avail-able networks to find the best talentpossible, Delaney said.

The fund also announced two in-ternal appointments. Jack Mc-Gougan, investment manager, prop-erty has been promoted to head ofproperty and John Hopper has beenpromoted to head of income assetsfrom his current role as investmentmanager for fixed income. SR

Metlife retainsStatewide mandateMETLIFE has secured a renewal of its insurancemandate with South Australia’s Statewide Super.

The Adelaide-based fund announced it had decid-ed to continue its 18-year relationship with Metlife afterconducting an extensive competitive tender process.

Under the new mandate, Metlife has agreed to de-liver enhanced death, total and permanent dis-ability and income protection insurance at no extracost.

Commenting on renewal of the mandate, StatewideSuper chief executive John O’Flaherty said it hadbeen based on Metlife’s substantial improvement inproduct offering. SR

APRA defends rights on capital requirementsTHE Australian Prudential Regulation Au-thority (APRA) has defended its right to im-pose minimum capital requirements on super-annuation fund trustees, even though it would notroutinely do so.

APRA’s defence of its position has been outlinedin the regulator’s response to submissions withrespect to a consultation package. In the response,it covered the issue of the adequacy of resourcesheld by superannuation funds, noting that whileit “would not routinely impose a specified minimumlevel of financial resources’ it was open to APRAto do so on a case-by-case basis.

It said that one submission had raised concernsthat the guidance suggested APRA had unfettereddiscretion to increase capital requirements for

trustees, and that this was not mandated by leg-islation or subject to a procedural process of fair-ness with clear guidelines.

APRA responded that it was empowered by theSuperannuation Industry (Supervision) Act toimpose additional licensing conditions on atrustee where it believed it had prudent reasonsfor doing so.

APRA said it had the power to impose specifiedminimum levels of financial resources to be held bya trustee as a licence condition – albeit this wassomething that was not routinely done.

“Any decision to specify minimum levels of fi-nancial resources would be subject to careful con-sideration by APRA and any such decision would besubject to appropriate procedural fairness process-

FSC queries value of MySuperTHERE is no need for the My-Super recommendations to beinstituted if the Future of Fi-nancial Advice Reforms(FOFA) and the SuperStreamrecommendations are imple-mented properly, according tothe chief executive of the Fi-nancial Services Council(FSC), John Brogden.

Speaking prior to the launchof the FSC annual conference inMelbourne, Brogden said thebenefits of MySuper couldn’t becompared to the benefits of im-plementing the SuperStreamproposals.

“MySuper does nothing aboutaccount consolidation, it doesnothing about reducing the costsin the day-to-day administration[of super],” Brogden said.

“If you combine SuperStreamand FOFA, and the reforms thatboth of these can bring, itdemonstrates there is really noneed for MySuper,” he said.

In an address to the confer-ence, David Deverall, chair ofthe FSC, said SuperStreamshould be top of policy for thegovernment because of the“massive” savings in the recom-mendations.

SuperStream is estimated tosave up to $20 billion over a 10-year period, according to anErnst and Young study com-missioned by the FSC. Thebulk of the savings would comefrom mandatory electronictransactions and straight-through processing.

The cost of implementing theSuperStream proposals is esti-mated at $1 billion for the in-dustry, according to the study.

“In terms of the cost/ben-efit analysis, it is very clearthe investment of $1 billionwill deliver, in effect, 19 times

savings,” Brogden said.Brogden said the super in-

dustry needed to express a “meaculpa” for not instituting ad-ministration savings on its own.

“I think we’ve spent too much

time bickering over whose sys-tem and whose codes and whoseprocesses will be used, andtherefore rather than one areachanging, we’ve had no moveforward,” he said. SR


Mark Delaney

John Brogden


INVESTOR-owned fund managerIFM plans to generate financial flex-ibility by delivering a profit in spiteof reservations from its sharehold-ers, according to new chief execu-tive Brett Himbury.

“We are going to make a profit asa business – I’ve told our industryfund shareholders that we’re goingto do that. Most of them have said‘don’t make a profit, we want it in theform of lower fees’, [but] we’ve saidwe must compete with the Mac-quarie Banks, Tyndalls, whoeverelse you want to name, and in orderto do that we need financial flexi-bility,” Himbury said.

IFM’s cost base has increasedthree fold over the past four years asthe manager opened offices in Lon-don and New York, recruited newstaff and improved systems, he said.

“I don’t believe there’s a fund man-ager anywhere in the world that hashad the guts, temerity or shareholder

support to triple its cost base be-cause it’s been the right thing to doby its investors … while revenueshave gone to hell in a hand basket,”he said.

To be competitive, the managerneeds to attract and retain talent,potentially open further offices inplaces like south east Asia, and con-tinue to invest in improved systemsand products, he said.

IFM benefitted from a unique own-ership structure where it is whollyowned by around 35 industry fundsthat invest in the manager and makeup its major clients, Himbury said.

The balance of that structure andthe culture that is driven by thatcombined with the fact that the firmwants to compete with the best inthe world is a great combination, hesaid.

“We need financial flexibility tocompete,” he stressed. “We mustnever lose sight of the fact that our

responsibility is to perform, there’sa lot of other choice [in the market],and we need the financial flexibilityto ensure that that performancecomes about,” he said.

“Our focus over the next few years isto make sure we not only bring that in-dustry ethos and that not-for-profitethos but we absolutely compete withthe best in the world,” he said.

The funds management industryas a whole needs to make sure thefocus is on net return to membersrather than just costs, Himbury said.

“We’re really worried that in an en-vironment where trustees have agreater accountability, the easiestthing for them to measure is cost andthey will make simple decisions thatwill cost the long-term wealth of Aus-tralians,” he said.

“If we dumb it down and we have ex-posure just to listed assets classeson an index basis paying five basispoints, it will be a false economy tosave investors 10 or 20 basis pointsat the expense of a potential 100, 200plus additional basis points they mightget per annum by investing in goodquality, longer-term assets.” SR

Many funds already hold risk reservesINCREASING numbers of superannu-ation funds are already well-placed todeal with any future governmentmoves to impose a requirement to holdoperational risk reserves.

A Mercer survey has revealed thatof 28 industry, public sector and cor-porate superannuation funds, 75 percent said they had a reserve in placecompared to just 56 per cent in 2008.

Further, the Mercer research foundthat of the 21 funds with an opera-tional risk reserve, a third had actu-ally used their reserve during 2009.

Commenting on the research, Mer-cer senior partner David Knox said thewidespread uptake of operational riskreserves highlighted the advantage of

the practice and bodes well for seeingthe recommendations of the CooperReview passed into legislation.

“If the recommendation on opera-tional risk reserve is adopted, the goodnews is it won’t be a quantum leap formany super funds,” he said. “Instead,it is a continuation of good practicewithin the industry.”

However, Knox said there was noone-size-fits-all approach on how muchshould be held in such reserves.

“While it makes sense to have a min-imum and maximum range for reservelevels, the fund should be given flex-ibility according to its size, insurancearrangements and actual operations,”he said. SR

HSBC wins Erste custody mandateHSBC has been appointed custodian for Erste Group Bank AG in Australiaand New Zealand.

Alexander Schleifer, head of custody and network management of ErsteGroup Bank, said Erste chose HSBC due to their long standing relationshipwith the bank in several markets around the world, and appreciated the pro-fessional service, experience and global reach that HSBC offers.

Andrew Bastow, head of securities services for HSBC in Australia, credit-ed HSBC’s client service, technology solutions and strong position in the se-curities services market for the mandate win.

HSBC is Australia’s largest sub-custodian with more than $500 billion inassets under custody and 61 per cent market share in assets held for cross bor-der clients as at 31 December, 2009, the company said. SR

IFM to build profits and focus on flexibility

8 NEWS www.superreview.com.au

Brett Himbury


10 EDITORIAL www.superreview.com.au

Few Australian Governmentshave controlled both theHouse of Representatives

and the Senate. The last to doso was the Howard Governmentin its last term. Thus, on the faceof it, there should be nothing toworry about when the Senatorselected on 21 August take theirseats in the upper house next yearand the Australian Greens as-sume the balance of power.

Minority parties have fre-quently held the balance ofpower, with the Australian De-mocrats most recently, havingwielded more than their shareof influence through theHawke/Keating period and thenthe first two terms of theHoward Government.

Did the Australian Democ-rats represent a significant im-pediment to the major parties

implementing their policyagendas? Only at the marginbut their presence gave rise toplenty of ‘legislative camels’ asfirst the Hawke/Keating Gov-ernments and then Howardsought to translate policy intolegislation and then manoeu-vre it through the Senate.

There will be many stillworking in the Australian su-perannuation industry that willrecall the degree to which arange of legislation impact-ing on the sector was amend-ed to ensure the support of theDemocrats. Some of thoseamendments were justifiedand arguably may have im-proved the ultimate bill. Otherchanges simply made thingsmore complicated.

And so we come to theGreens controlling the Senatein 2011 and the need to con-sider how their policy approachwill be likely to impact super-annuation in Australia. As astarting point, those seekingguidance from the AustralianGreen’s policy pronouncementswill find themselves only slight-ly better informed.

The only reference to super-annuation contained in the poli-cies the Greens took to the Fed-eral Election was that the partywould “conduct a full review ofthe superannuation system withthe aim of reducing its com-plexity and establishing pro-gressive rates of superannuationtaxation”.

It is worth noting that theparty’s stated aim of simplifyingsuperannuation would fit nice-ly with some of the recommen-dations of the Cooper Review,but that its reference to “estab-lishing progressive rates of su-perannuation taxation” wouldseem to be inconsistent with thethemes contained in the HenryTax Review.

And then there is the questionof lifting the SuperannuationGuarantee in circumstanceswhere, like the Australian LaborParty, the Greens are happy to

impose higher taxes on the re-sources sector but are thensilent on the question of whethera portion of those taxes might bedirected towards increasing thesuperannuation guarantee.

On the face of it, one sector ofthe superannuation industryshould not feel phased by theAustralian Greens holding thebalance of power in the Senate.Notwithstanding the tradition-al support of the trade unionmovement for the AustralianLabor Party, there is plenty of ev-idence to suggest the AustralianGreens would find plenty to ad-mire about the manner in whichIndustry Funds Managementhas been prepared to invest ingreen projects, particularly re-newable energy.

Similarly, the Greens havetended to side with those whohave been critical of excessiveexecutive remuneration and the

dominance of institutions in par-ticular markets.

At the time of writing, themajor parties were still hagglingand horse-trading over which ofthem could form Government.For the superannuation indus-try, the election of a CoalitionGovernment would representa radical change in policy di-rection while the re-election ofa Labor Government, albeit inminority, would likely result ina slowing down in the policytime-table outlined before theelection.

Irrespective of who ulti-mately gained control of theTreasury benches, the realityconfronting the superannua-tion industry is that a reason-able understanding of Greendoctrine will become funda-mental and do not be surprisedby the evolution of greencamels. SR

Beware of green camelsWith the Greens set to control the

Senate in 2011, the superannuation

industry should consider how its

policies will affect future changes.

Mike Taylor

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www.superreview.com.au FRAUD 11


Adetermination by the Su-perannuation ComplaintsTribunal (SCT) (Deter-

mination No. 08-09\047) high-lights the need for trusteesto carefully examine whethertheir payment benefit processexposes them to the risk ofthird party fraud. Trustees alsoneed to audit the protectivemeasures they have in place todeal with the risk of doublejeopardy, if fraud occurs.

A significant questionraised by the Determinationis who should bear the riskwhen neither the trustee northe member is apparently atfault?

Fraudulent instructions:In the recent SCT case, the

trustee of the member’s su-perannuation fund had writ-ten to the member shortlyafter his employment hadceased requesting paymentinstructions.

Soon after, the fund re-ceived completed payment in-structions, together withcopies of the following docu-ments, each of which hadbeen certified by a personpurporting to be a Justice ofthe Peace:

1. certificate of Australiancitizenship;

2. New South Wales driverslicence; and

3. Medicare card.The payment instructions

directed the trustee to pay themember’s superannuation en-titlement of approximately$100,000 to a self-managed su-perannuation fund (SMSF).The trustee obtained a letterfrom the trustees of the SMSFstating the SMSF was a com-plying superannuation fund el-igible to receive transfers ofsuperannuation benefits.

The trustee paid the ben-efit to the SMSF in accor-dance with the instructionsreceived. Unfortunately, theseinstructions were subse-quently found to be an elab-orate fraud perpetrated by athird party, purportedly with-out the knowledge or in-volvement of the member.

The member claimed he didnot become aware of the pay-ment until several monthslater, when he decided torollover his benefit. As he ini-tially intended to leave hisbenefit in the fund, he took noaction in response to the fund’sletter, which followed termi-nation of his employment.

Trustee refused payment:When contacted by the

member, the trustee informedhim that his benefit had al-ready been rolled over to theSMSF. The member lodged acomplaint with the trustee re-garding the payment of his su-perannuation entitlement tothe SMSF. The trustee reject-ed the complaint and advisedthe member to seek recom-pense from the SMSF throughthe relevant authorities.

The member lodged a com-plaint with the SCT claimingthat the trustee’s decision torefuse payment of the su-perannuation benefit to himwas unfair or unreasonable.This was on the basis thatthe trustee allegedly failedin its duty of care in verify-ing the documentation, priorto executing the transfer tothe SMSF.

In declining to pay a ben-efit to the member, thetrustee relied on the terms ofthe trust deed governing the

fund. The trust deed con-tained the following provisionregarding discharge of theTrustee’s liability:

“To the extent permitted bySuperannuation Law, theTrustee is discharged from allobligations in respect of abenefit if it is paid in goodfaith to or on behalf of a per-son the Trustee believes to beentitled to it.”

Regarding the trustee’s lia-bility, the trust deed stated:

“Subject to SuperannuationLaw, the Trustee is not liablefor any loss or damage to anyperson arising out of any mat-ter where in respect of thatmatter: the Trustee relies uponany signature, notice, instru-ment or other document be-lieved by the Trustee to be gen-uine and to have been properlypassed, executed or approved.”

There is more to the payment of

superannuation benefits than is

immediately obvious and, as JENNY

WILCOCKS points out, trustees would

do well to understand a recent case

handled by the Superannuation

Complaints Tribunal.

Avoiding the risk of fraud

Continued on page 12 ☞

Who should bear therisk when neither the

trustee nor themember is

apparently at fault?


12 FRAUD www.superreview.com.au

The trustee claimed it hadapplied a reasonable standardof care regarding the benefitpayment, having followed itsown internal procedures,which it considered to be inaccordance with industrystandards. The trustee notedthere were no suspicious cir-cumstances, which ought tohave put it on notice regard-ing the benefit payment.

Member’s claim rejected:The SCT affirmed the de-

cision of the trustee. The SCTstated:

“With the benefit of hind-sight, it is clear on examina-tion that on the face of it,some of the documents lackveracity. However, in the cir-cumstances, the tribunal is ofthe view that there were nosuspicious circumstancessuch that the fund shouldhave departed from its normalprocedures in processing thebenefit.”

The SCT determined thetrustee had not failed to ex-ercise an appropriate degreeof care in transferring thebenefit to the SMSF. In ad-dition, it found the trusteecould rely on the clause of thetrust deed regarding signa-tures thought to be genuine.

It is unclear from the SCT’sreasons, whether the trusteeheld on file a signature of themember, which could havebeen used for comparisonpurposes. There is also noth-ing to indicate the memberwas in any way at fault or hadnegligently exposed himselfto the risk of this type offraud.

The SCT’s reasons for itsdetermination do not discuss

the trustee’s risk manage-ment strategy or insurancearrangements, in particularwhether the trustee main-tained fidelity and crime in-surance under, which itcould have claimed in thistype of situation.

Broader issues arising fromthe determination:

The outcome of this com-plaint is a member, appar-ently through no fault of hisown, has lost his superannu-ation savings due to thefraudulent actions of a thirdparty without compensationfrom the fund. Even if atrustee’s actions are above re-proach, it is difficult to seethis as a fair outcome fromthe member’s perspective. Ofcourse, we do not have accessto all the information con-sidered by the trustee and re-ceived by the SCT and canonly rely on what is disclosedin the Determination.

It may be the specificwording of the trust deed inthis case and the fact thatthere was no evidence of neg-ligence on the part of thetrustee, which influenced theSCT’s determination. How-ever, as a matter of principle,the case raises an importantissue. Is it appropriate for thetrust deed to include sucha provision and for a memberto be left without his super-annuation benefit in thesecircumstances, given the fi-duciary nature of the rela-tionship between the trusteeand a member?

The risk of third partyfraud is a risk, which shouldbe identified and assessedas part of a trustee’s riskmanagement strategy as re-quired under its registrable

superannuation entity (RSE)Licence. The SuperannuationIndustry (Supervision) Act1993 (Commonwealth) (SIS)requires that a risk man-agement strategy of a RSELicensee must set out rea-sonable measures and pro-cedures to identify, monitorand manage risk, includingthe risks of potential fraudand theft.

This risk for members can

be mitigated by the trustee anappropriate fidelity and crimepolicy, which protects againstthird party fraud in the cir-cumstances of this case,where there was apparentlyno fraud or negligence by thetrustee or the member. Thequestion of whether thetrustee had met its risk man-agement obligations underSIS was not referred to in theSCT Determination.

☞ Continued from page 11

Avoiding the risk of

Even if a trustee’sactions are above

reproach, it isdifficult to see thisas a fair outcome

from the member’sperspective.

Members entitled to maxi-mum protection:

The two sections of thetrust deed on which thetrustee relied, were both sub-ject to superannuation lawand therefore would not haveexcused a failure to meet therisk management require-ments under SIS. Had fideli-ty and crime insurance beenin place, the member couldhave claimed against the

fund, which in turn couldhave been compensated bythe insurer. There would thenhave been no loss to the mem-ber or the fund.

Members of regulated su-perannuation funds should beentitled to the maximum pro-tection the law can provide. Iftrustees were required tomaintain appropriate insur-ance to ensure they are prop-erly compensated in the event

of fraud to which they havenot contributed, the situationthat arose in this case couldbe avoided.

This could be achieved bymaking fidelity and crime in-surance a condition of all RSElicences, in the same way Aus-tralian Financial Services(AFS) Licensees must meetthe insurance requirementsimposed under the AustralianSecurities and InvestmentsCommission (ASIC) Regula-tory Guide 126.

Cooper Review:One of the recommendations

of the Cooper Review is thatthe Federal Governmentshould provide a system to:

■ offer appropriate SMSFinformation to large Aus-tralian Prudential RegulationAuthority (APRA) funds (in-cluding member level details,confirmation that identifica-tion of/trustees has occurredand the SMSF’s bank accountnumber) so the large APRAfund can verify the details ofSMSF membership before arollover request to that SMSFis processed; and

■ require the large APRAfund, upon appropriate con-firmation, to immediatelyprocess the request and elec-tronically transfer the rolloverto the validated SMSF bankaccount.

If these recommendationsare adopted, it should providegreater protection againstfraud. However, even with thisprocess the fraud, which oc-curred in this case, would nothave been avoided.

Jenny Willcocks is head ofHolding Redlich’s super-annuation and fundsmanagement practice.


www.superreview.com.au FRAUD 13

CHECKLISTAssessing how you are placed to respond to third party fraud:

1. Carefully consider the provisions of the trust deed to ob-tain a clear understanding of:

(a) the trustee’s obligations regarding benefit payment; and(b) the point at which, it will be validly discharged from the

obligation to pay a benefit.Note: Any amendments to the trust deed must be in the best

interests of members. An amendment intended to avoid liabili-ty and deprive members of recourse against the fund in suchcircumstances may not meet this requirement and may not beconsistent with the trustee’s fiduciary duty of care.

2. If it does not already exist, consider obtaining fidelity/crime in-surance to enable the fund to pay benefit payments to memberswho, through no fault of their own, have been deprived of theirretirement savings as a result of the fraud of a third party. Indoing so, trustees should take into account the following obligations:

(a) To act in the best interest of members(b) If they hold an Australian Financial Services Licence

(AFSL), to have adequate professional indemnity insurance underCorporations Act 2001 (Commonwealth). Although profession-al indemnity insurance often excludes crime or fidelity cover, thetrustee may be obliged to obtain a separate insurance policy tocover such risks to the extent that those risks relate to breach-es of the trustee’s obligations under Chapter 7 of the CorporationsAct 2001 (Commonwealth). The ASIC Regulatory Guide 126 statesat paragraph 126.54: losses caused by fraudulent conduct, whichamount to a breach of Chapter 7 of the Corporations Act 2001(Commonwealth) must be covered. However, that obligation maybe confined to fraud of the Australian Financial Services Licenseeand those for whom it is legally liable.

(c) Include in the risk management strategy how such a riskcould be mitigated, including by transference to insurance.

3. Review disclosure documents. If disclosure documents in-dicate members will be paid a benefit on the happening of a con-dition of release, without any qualification, then the trusteemay be exposed to liability if it declines, due to third partyfraud, to make payment of the benefit.

4. Review benefit payment procedures carefully to ensure thatthey will stand up to scrutiny. Consider whether the benefitpayment procedure should include comparison of the signa-ture on the application for benefit payment with earlier signa-tures received from the member. Are there other safeguards avail-able to the trustee, particularly when transferring to an SMSF?

5. Review the fund’s fraud policy to assess how it would respondin circumstances similar to those of this case.

fraud


14 TECHNOLOGY www.superreview.com.au

From core registry solu-tions to the processingof transactions to fi-

nancial advice platforms, thescope of what technologyprovides the super industryhas been increasing. Com-petition within the super in-dustry seems to be drivingsystems and process com-plexity and yet, just as thereare multiple technologyproviders to this industry, sotoo are there a number of ap-proaches to technology im-plementation. The challengelies in fund trustees’ abilityto pick between them.

Commenting on the tech-nology now required bysuper funds, Bravura globalhead of product DarrenStevens says that the com-plexity is certainly increas-ing, and that in a post-Coop-er environment it will onlybe enhanced.

“The requirement to giveintra-fund advice for exam-ple, which hasn’t really beendefined, versus the choiceadvice, the full advice, willmean that you’re going toend up with specialistproviders of those technolo-gies,” he says. “Funds willneed to have the ability to

provide a lot of that intra-fund advice on a cheap basiswith straight-through pro-cessing linked into theiradmin systems and linkedinto specialist calculators.

“The requirement to haveto do detailed projectionsgoing out to retirement willrequire specialist providers,”continues Stevens. “So you’vegot guys that are producingthat right now and it’s theability of the underlying reg-istry solutions and the adminsolutions to integrate withthose that is what’s going tobe important.”

For IQ Business Groupchief executive GrahamSammells, much of the tech-nology status quo has beendictated by constant regu-latory change within thesuper industry.

“The super industry hasbeen burdened by constantregulatory change and thathas meant that the platformsthat exist out there in themarketplace today have hadno choice but to focus on thecore registry functions,” hesays. “So by that, I meanmanaging member details,benefit calculations and con-figuration and they simply

haven’t had the chance tokeep up with a lot of the pe-ripheral services like work-flow, reporting, intelligence,CRM [customer relationshipmanagement], dash-board-ing and the like.

“I think they’d be the firstto acknowledge that they’rebehind the market there and,in fact, some of them havetaken a conscious strategy tofocus on the core and just dothat really really well.

“Some super fund cus-tomers are taking that strat-egy as well and sort of going‘best of breed’ specialisationon the key peripheralsaround it,” Sammells adds.“They’re therefore opting tomake systems talk to eachother in order to achieve thebest outcome rather thanhaving the one platform try

to do everything.”With a very different per-

spective on the merits of spe-cialisation within superan-nuation platform technology,DST Global Solutions Blue-door executive director MarkCassar says while integrationis certainly the key, it is dif-ficult to achieve it with arange of products from dif-ferent providers.

“What we’ve had in thepast is a whole bunch of spe-cialisation,” he says. “You’llsee major institutions buyingworkflow systems, imagingsystems, web systems, andeach one of these is a spe-cialist system in its ownright.

“Of course, the issue withthose is the integration proj-ect that’s required to makeeverything work together

and in an efficient manner,”continues Cassar. “So whatwe’ve seen in recent times isa shift away from that kindof approach to an end-to-end, purpose-built superan-nuation system taking intoaccount the whole end-to-end business process.

“And that’s really what weneed because at the end ofthe day, we’re effectively try-ing to do more with less.”

Cassar says fund trusteeshave only to look at wherethe wastage is in their su-perannuation systems andprocesses to see how impor-tant integration is on thewhole.

“The wastage is where peo-ple get involved in processesand we don’t want that tohappen for two reasons,” hesays. “One, we don’t want

The changing rules with respect to the

provision of advice within super,

combined with the recommendations

of the Cooper Review, are driving

technological change. The challenge,

DAMON TAYLOR writes, is to

understand the options.

The new architects of

www.superreview.com.au TECHNOLOGY 15


them to do the work to beginwith and secondly, when theydo the work, they make mis-takes and those mistakes canbe pretty profound.

“The true differentiatorhere is integration,” contin-ues Cassar. “It’s the way allof these systems are inte-grated and work togetherand the cost of getting thatto happen. And even if youcould get to spend the moneyon making that work, therehave been a litany of differ-ent projects that have failedto deliver on that outcome.

“They just don’t get to theend, it’s just too expensive,too time-consuming andthings go wrong.”

Of course, the other side oftechnology implementationcomes down to where scalefits into the equation. In the

past, scale has been a vitalingredient in the technologygame, but according to Sam-mells scale can be accom-plished even with the use ofmultiple products.

“I think that if there’s cleardelineation between whateach part of the applicationstack is supposed to do, thenactually scale can be wellmanaged and perhaps bettermanaged when using multi-ple ‘best of breed’ specialisedproducts,” he says. “Nowa-days, using open standards,the whole exercise of inte-gration, while I won’t say it’seasy, is more optimal.

“And if you can get that in-tegration right, then you canleverage the ‘best of breed’in each of the specialties,to do what they do well, andparticular customer rela-tionship management(CRM) vendors will achievescale and functionality awhole lot better than tryingto build that stuff into an ex-isting platform,” adds Sam-mells. “So I think that if theintegration’s right and if theprocess is right, that scale isachievable without the bigenterprise platform model.

“But the key here is work-ing out what that right tech-nology and systems archi-tecture is so that you can fitthe pieces together.”

Commenting specificallyon the delivery of financialadvice platforms, ProvisioTechnologies directorCameron O’Sullivan says thatthere might be elements ofthe technology game whereperspectives on scale arechanging.

“What we’re all looking forin the advice space – and bythat I mean the members,

the funds and the guys tryingto provide the advice tools –is the ability to service amuch greater percentage ofthe fund membership than iscurrently possible,” he says.“And the only way to realis-tically do that without dra-matically changing the feestructures and the fee basesall the members are payingis to be able to do it at a sig-nificantly lower cost thanwould be possible using thetraditional tools that every-one’s been running with.

“Some combination of webdelivery and call centre so-lutions really is the only an-swer for those funds with a60 to 70 per cent portion oftheir membership who real-ly aren’t appropriate for a fullface-to-face type adviceprocess,” O’Sullivan contin-ues. “Their needs don’t jus-tify it and they’re not willingto pay the fees.

“To me, scale implies thatyou have to get to a certainsize before this will work butin reality, any fund largeenough to exist probably hasenough members to justifysome form of rapid adviceprocess because its going todeal with the majority oftheir members.”

Alternatively, Cassar saysthat scale will always be bestleveraged by an end-to-endsystem.

“It goes back to this wholepurpose-built theory and ob-viously we can get economiesof scale across that,” he says.“But it’s a different kind ofscale. When some financial in-stitutions talk about scale,they’re talking about 200 dif-ferent administrators anddoing more with another 200.

“When we talk about scale

as a vendor, we’re talkingabout a goal of having 30 dif-ferent institutions and so wecan leverage any developmentcost across all of thoseclients,” continues Cassar. “If,for example, ANZ pick a work-flow system and AXA pick aworkflow system and AMPpick a different workflow sys-tem, they each have to do thatfull integration and the costis three times as much.

“But when we do it, we doit once for everybody and wedo it in a far deeper, moreseamless sort of way than in-dividual institutions couldever achieve in their ownright.”

Not surprisingly, one of themajor catalysts for a renewedfocus on technology and therole it has to play withinsuper has been reboundinginvestment returns. Whileviews seem to differ on theconsistency of technologyspend throughout the globalfinancial crisis (GFC),Stevens believes current cir-cumstances have given fundsan opportunity to take stockof their technology situation.

“Most of the funds thatwe’ve been talking to havebeen looking through theirvarious processes and de-termining where the bottle-necks are,” he says. “Andwhen I look at the Super-Stream projections on what’sgoing to be saved in the in-dustry, I think most of thesavings are going to come outof these sorts of administra-tive processes that peoplehave been working through.

“I know about three or fourfunds at the moment who areputting in new workflow sys-tems, they’re putting in op-tical character recognition

systems to get the straight-through processing occur-ring with way less paper han-dling and people are puttingin CRM systems as well,”Stevens continues. “So I’mseeing a lot of that ancillarysystem work happening rightnow and, in time, you’ll seethe benefits of that down-stream.”

Cassar says that he’d bemore inclined to say that theGFC has presented fundswith an opportunity when itcomes to technology.

“What the GFC did aboveall else is put pressure onfunds and their executives,”he says. “When you thinkthat in order to maintainmargins in an environmentwhere revenues are de-creasing, you’ve got to de-crease your costs – and yourealise that that’s not an easything to do.

“So if you’re not on a rea-sonably efficient system, ifyou can’t take advantage ofsome of the technological im-provements that have beencoming over the last coupleof years, then you’re defi-nitely at a disadvantage.”

Looking at both technol-ogy spend through the GFCand many funds’ renewed in-terest in technological im-provement within their busi-ness processes, Sammellssays it will be interesting tosee what the next 12 monthswill bring.

“Part of all technologyspend has to be consistentbecause that’s the basicmaintenance activity,” hesays. “But only recently havewe noticed some funds start-ing to really lift their heads


technology


16 TECHNOLOGY www.superreview.com.au

on some discretionary tech-nology spend, putting a prop-er focus on certain data man-agement activities or investingin some data warehousing andreporting capabilities wherethese kinds of projects havebeen off the radar for the lastcouple of years.

“The most important thinghere though is that thethought process happened,”Sammells continues. “I thinkit gave funds a real opportu-nity to look at not just systemsbut all the processes that gowith it and we’re finding somefunds and some administra-tors putting a good focus onprocess improvement and notjust technology.

“That’s pretty healthy be-cause the reality is that youcan’t have one really doingwell without the other.”

Yet while technologybroadly is being viewed withfresh eyes by all super funds,if recent press is any indi-cation, financial advice de-livery is its biggest drawcard.Advice in all its forms is cre-ating a great deal of intereston the part of trustees andmembers alike and accord-ing to Sammells, technolo-gy providers are well placedto assist.

“We’ve seen a few funds geton the front foot with somenew pieces of technologythat are being integratedinto their environment andoffering a particular solutionto this issue of intra-fund ad-vice,” he says. “Some of theseare off-the-shelf packagesand some funds have tried todo their own thing usingsome sort of rules engine totalk to the platform to then

expose the outcome of thatthrough the web.

“So that’s clever andthere’s plenty of other solu-tions out there like that, butthey’ve typically been bolt-ons to the core platform andnot the platform itself ex-panding outwards,” Sam-mells continues. “I thinksome funds have started tolook at what’s out there andsome are still going throughthe mindset of ‘should I tryto develop my own?’ or‘should I go back to the plat-form vendor and ask them tobuild something for me?’ ver-sus the third party packagesthat are out there.”

Sammells says that manyfund executives are stillmaking their minds up onwhat direction to take whenit comes to the provision offinancial advice.

“And I say that because Ionly know of probably ahandful that have gone outthere and said that they’veacquired applications andare going to be offering thatservice,” he says. “But cer-tainly, they’ll be looking longand hard at the whole issueof how to do it on scale andtechnology has undoubted-ly got a key role to play.”

However, the key question,according to Stevens, iswhether funds will be able toimplement financial advicedelivery platforms aroundtheir existing processes, sys-tems and software.

“There’s definitely going tobe some element of increasedtechnology spend for the oldersolutions,” he says. “Where-as some of our legacy systemshave a full suite of APIs [ap-plication program interfaces]or remote procedure calls

which allow for that inte-gration to occur, that’s justbecause we’ve had themaround for years and we’vebeen integrating with web-sites for years.

“But there still will be ad-ditional requirements and Su-perStream as well will bring inadditional requirements,”Stevens continues. “So themore modern architecture, theservice-oriented architected

solutions are certainly the onesthat will be the lower cost forsuper funds.”

For his part, O’Sullivansays that just about everyfund that has tried using oneof their existing solutions,which usually meant someform of holistic software, hasreally struggled to get the ef-ficiency gains they were look-ing for.

“You’re looking at some-where between two and threeSOAs [statements of advice]a day and that’s going to strug-gle to ever deliver the scalethat people want,” he says.“But within transactional ad-vice and the new systems spe-cific to it, if the phone calltakes half an hour then thewhole advice process takeshalf an hour because during

the phone call, and as partof quantifying the benefitsto the member, you’re build-ing the scenario and themoment the phone call’s fin-ished, the click of a buttonis all that’s required for theadvice documentation tocome out.

“You’re not cutting cornersin terms of the advice serv-ice – the phone call’s goingto take however long it takesto explain the strategy to themember and get them com-fortable with it – but the ac-tual paperwork productionafter that is a click of a but-ton,” O’Sullivan continues.“And that’s far more the sortof scale that funds are goingto need.”

So looking to the future oftechnology within the superindustry, the primary chal-lenge seems to lie in balanc-ing legacy systems that mayor may not be working suf-ficiently against new tech-nology that may be in theform of multiple products orone end to end solution.

As a broad comment, Cas-sar says that a great deal ofthe industry’s current tech-nology is comprised of lega-cy systems.

“We’ve seen some of thebig providers try to takesome steps forward in orderto get their scale up but thewhole scale argument is aninteresting one,” he says.“What we’re seeing, in in-dustry funds in particular, isif you read the financialpress, you’re reading thatthese funds with less than $6billion can’t survive, lessthan this many hundreds ofthousands of members andthis kind of thing.

“Well, the technology today

is actually changing that, be-cause if you take the sublimeto the ridiculous, if you’ve gotno administrators becauseeverything is happening on-line and in real-time with noone having to do anything,then does it matter whetheryou have 10 accounts or10,000 accounts or 10 mil-lion accounts?” asks Cassar.“So when it comes to thiswhole argument about scale,the legacy technology iswhere scale’s really impor-tant because they can’t getthat efficiency.

“But with the later tech-nologies, when you’re doingeverything online, self serv-ice, that sort of thing, itschanging the nature of thatscale debate.”

Stevens says that his mainobservation is that manyfunds have well-establishedlegacy solutions and are com-fortable with them.

“They’ve tended to focus onthe areas of inefficiency intheir businesses, throughworkflow, OCR [optical char-acter recognition], and mak-ing sure that integrates withtheir legacy systems,” he says.“A good example is someonelike Mercer who have spentquite a lot of money and timeand effort themselves over theyears building their own suiteof solutions around the out-side of our heritage solutionSuperb.

“So if you went to Mercerand said ‘look, will you be mi-grating off or changing Su-perb?’ they’ll sit there andsay ‘no, it works, it’s a goodcalculation engine and we’vefixed up the rest of our busi-ness by doing other things’.

“Over time that will changebut it will change depending


Darren Stevens

The new architects of technology

www.superreview.com.au TECHNOLOGY 17


on the type of business-es that are there.”

Giving a guide to whatthe technology providerfocus will be in the fu-ture, Cassar says thatDST Global SolutionsBluedoor will continueworking to improve theefficiency of the admin-istration process.

“We’re doing that byfully integrating all thecomponents of the end-to-end business process,” hesays. “Firstly, we’re tryingto remove paper from thesystem entirely, and Coop-er will help to do that, buteven in the legacy busi-nesses where paper is stillvery much a part of theworld we’re providing au-tomation.

“So from the time mailhits the mailroom and isscanned, we’re readingthe image data on a pieceof paper and pre-popu-lating that data into thesystem,” Cassar contin-ues. “And that means thatthe administrator ischecking that we’ve ex-tracted the data off thepaper correctly ratherthan keying it in them-selves. But even in thatsort of old world context,we’re still creating higherlevels of efficiency andwe’re doing that with thatreally tight integration be-tween our modules.

“Our continual aim isto get higher levels of ef-ficiency, taking that nat-ural cluster of systemsthat make up that wholebusiness process of theadministration of superand really tightly inte-grating that.” SR


18 ADMINISTRATION www.superreview.com.au

Though Australian eyesare yet to focus on the re-sult of the recent feder-

al election, it seems certainthe superannuation industrywill continue on its currentpath of evolution. The indus-try’s various reviews havegiven all participants a greatdeal to think about with re-spect to positioning in the su-perannuation marketplaceand, according to Steve Schu-bert, managing director of Su-perannuation for Russell In-vestments, fund trustees arewell aware administration willhave an important role to play.

Pointing to a recent uptickin tender activity as evidencemany funds were actively ex-amining their existing ad-ministration offerings, Schu-bert said funds’ interest havebeen about more than sim-ply due diligence.

“Generally, I think there’sbeen a view in recent timesthat funds ought to look attheir providers and clearly theAustralian Prudential Regu-lation Authority (APRA) likesthem to do that,” he said. “ButI think our sense is that thisis more than just kicking thetyres.”

“I think there’s a genuineinterest in exploring new serv-ice models and, just as a bit ofbackground, that’s been one

of the reasons that we have re-ally revisited our entire serv-ice delivery model,” Schubertadded. “We’re in the process ofmaking some pretty significantchanges in our model, sowhere we have previously out-sourced a lot of activity to IBM,we’re in the process of bring-ing a lot of those activitiesback in-house, particularlyaround member services.”

“In our view, super fundsare wanting to increase theways in which they can en-gage with their members andso the key issue for us, is mak-ing sure our model allows usto control those activities and,more importantly, invest andinnovate in them.”

Alternatively, Peter Beck,chief executive officer of Pil-lar, identified other motiva-tions for those funds going outto tender.

“It’s probably driven moreby all the Cooper Review ac-tivity that’s trying to encour-age funds to look at them-selves and drive efficiencies,”he said. “Part of it is driven bythe need to drive efficienciesinto those businesses and Ibelieve that the potential forconsolidation within the in-dustry is a factor as well.”

“There are a lot of discus-sions going on about potentialconsolidations, courting I

Irrespective of the current political

landscape, further change to the

superannuation industry is inevitable

and, as DAMON TAYLOR writes,

administrators are evolving their

offerings to deal with this change.

Delivering on changed

www.superreview.com.au ADMINISTRATION 19


circumstancesguess you would say, andthere’s definitely going to besome first mover advantagefor those in terms of securingadministration resources.”

Yet, while tender activitymay be a constant for serv-ice providers to the super in-dustry, government reviewsand the prospect of legislativechange is ever present.12months ago, administratorssignalled that the approach tobe taken was one of ‘wait andsee’ and in the wake of anelection, Greg Camm, chiefexecutive officer of Super-Partners, said the status quohadn’t changed.

“Unfortunately, with theelection result still undecid-ed, the reality is that the storycould still change,” he said.“The Coalition has been lukewarm, to the point of beingoffhand actually, about a lotof the stuff that’s been rec-ommended and announced,but what we’re saying is that95 per cent of what’s been an-nounced, we like, and if itturns into reality we’ll bejumping into it.”

“However, any preparationswe make depend on the ac-tual legislation,” Camm added.“You can’t build a systemaround a press release, you’vegot to build a system aroundlegislation.”

“All of these announce-ments require laws to gothrough parliament and itisn’t until you see that contentthat you can actually startcutting code and makingchanges.”

Also focused on the elec-tion, Beck said the easiestprediction was that nothingwould happen until that re-sult was clear.

“For certain parts of these

reviews, people will wait for asignal from the governmentas to what its intentions are,”he said. “But for other things,such as the use of tax filenumbers (TFNs), there seemsto be universal agreement toit, so we’re starting to thinkabout what that means for ourbusiness.”

“There are definitely somethings we believe are going toget up irrespective of whatgovernment is in place, likeTFNs, which are such a sen-sible thing that we find it hard

to believe it’s taken so long forus to get to this point,” Becksaid. “So stuff like that, we’repreparing and planning forhow it’s going to impact us.For limited advice, again wehave confidence the marketis starting to understandwhat’s required so, without re-ally waiting for regulation,we’re getting on with it anddeveloping our solutions.”

“There’s certainly not asmuch ‘wait and see’ as therewas a year ago. It’s more a caseof the writing’s on the wall andwe’re starting to plan for it.”

Schubert said while thechanges recommended by theCooper Review in particularhad not yet been implement-ed into legislation, it was in

the best interest of bothfunds, and service providersto be putting plans in place.

“I think if the industry sitson its hands and is waiting forlegislators and the dust to set-tle on the MySuper recom-mendations and so on, thenwe’ll be left behind,” he said.“So, in terms of finding waysto engage with members,some people are misinter-preting Cooper as being allabout dumbing down the serv-ice you provide and basical-ly assuming your membersdon’t want to engage.”

“But we just have a funda-mentally different view. Webelieve you can engage withmembers and get them tomake good decisions aboutthe level of contributions theymake and how prepared theyare for retirement,” Schubertsaid. “So funds can and shouldbe investing in those areasand services regardless of howquickly or slowly the legisla-tion from Cooper comesthrough.”

Schubert said when it cameto current legislative change;there was a comparison to bedrawn with Choice of Fund.

“When Choice of Fund wasfirst flagged back in the mid-90s, the industry started tothink about what it meanteven though it was nearenough to 10 years before thelegislation actually camethrough,” he said. “But by thattime, the industry had reallyfundamentally changed andadapted on the basis this wascoming at some stage.”

“All funds realised theyhad to modernise and up-date their products and en-gage better with their mem-bers so by the time Choice ofFund came in, it was almost

academic because they hadalready adapted and evolved.”

Of course, the one elementof prospective legislativechange that administratorsseem united in bringing tosuper funds immediately isthe provision of financial ad-vice. With the announcementof the Financial Advice Re-forms already having been agame changer for the indus-try, Gary Cox, director, ad-ministration services for Rus-sell Investments, said it wasan area in which all admin-istrators were keen to get onthe front foot.

“It’s been a huge gamechanger. Even the contact cen-tres these days are minimumRegulatory Guide 146 (RG146)qualified and then it steps upfrom there,” he said. “So interms of intra-fund advice,we’re an advocate. You cer-tainly need to provide thatkind of service to fund mem-bers to explain things like al-locations, top-up contributionsand so on and it’s really im-portant for us to provide thosesorts of services to membersto help them with that.”

“If it isn’t already, this isgoing to be a fundamental su-perannuation offering andsomething all funds will belooking to provide.”

For his part, Schubert saidone of the key issues was thatpeoples’ need for advice fol-lowed a broad spectrum.

“Its not just about needingto get information off the In-ternet or getting a financialplan or going to an adviserand then getting tangled upin issues about how the ad-viser gets remunerated,” hesaid. “In practise, there will


Steve Schubert


always be some members whoneed to pay for a full-blown fi-nancial plan (and obviouslythe fact that the new reformsmake sure that there’s a prop-er relationship between themember and their adviser,rather than the adviser beingpaid from institutions is a goodthing) but what needs to beput in context is that the vastmajority of super fund mem-bers aren’t going to be sittingdown and getting a full finan-cial plan.”

“They have informationneeds and advice needs fromtime to time and sometimesthose needs are relativelymodest and can be efficient-ly dealt with through thingslike intra-fund advice.”

Holding a slightly differentperspective, Camm said one ofthe main drivers behind an in-creased focus on the provision

of financial advice was the im-pending retirement of the baby-boomer generation.

“From an industry superperspective, you’ve got a bigcohort of members who arenow into their 50’s with rea-sonable balances,” he said.“They’ve now been in compul-sory super for nearly 20 yearsso their balances are gettingup and they’re thinking aboutretirement.”

“And when you get into thatheadspace, we all know thatyou need a bit of advice be-cause it just isn’t simple.”

However, when askedwhether the scope of whatcould be done under the pro-posed financial advice legis-lation was well defined, Cammindicated it was a tricky ques-tion to answer.

“I think that the lawyershave been in charge of thatspace for a long time and Ithink it’s incumbent on the in-

dustry to say to the lawyers‘hey, members can probablyget a bit more advice thanwhat you’re telling us’,” hesaid. “The regulators would beencouraging funds to givemore advice rather than lessbut the law is always readdown to its smallest parts.”

“Typically, our advice is ei-ther single issue or only to dowith superannuation,” addedCamm. “So the stuff that wedo, which is all phone based,

never strays outside of super-annuation.”

“We don’t provide a full fi-nancial planning service, that’sdone by Industry Funds Fi-nancial Planning on a face-to-face basis.”

Adopting a similar per-spective, Beck suggested oneapproach to be taken wasthat of self-limitation in re-gards to advice.

“We’re going down the trackof single-issue advice so we’regoing to be licensed to do full fi-nancial planning but we’re goingto limit what we do to a range ofissues,” he said. “So to the ex-tent that limited advice hasbeen regulated and limited,we’re not actually going to relyon that limitation.”

“We’re going to self-imposelimitations on what we do be-cause limited advice has gotto be simple and quick and it’sgot to follow a process,” Beckadded. “So to some extent, it’s

self-limiting in terms of whatyou’re able to efficiently andeffectively do through the weband contact centres.”

“But that’s also the opportu-nity. It’s got to be efficient andit’s got to go to the major issuesthat people have concernsabout or want advice on and weneed to give people quick so-lutions – it’s kind of like a fi-nancial planning quickie.”

According to Schubert, thesooner the industry has a cleardefinition on intra-fund ad-vice, the better administrators’financial advice offeringswould be.

“It’s still a work in progressand there are lots of things thathave been spoken about with-out obviously being legislated,”he said. “Following the elec-tion’s outcome, what we arehoping for is a bit more direc-tion about what we can do andabout what is being offered.”

“I think at the moment,


Greg Camm


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www.superreview.com.au ADMINISTRATION 21


everyone is struggling todefine what intra-fundadvice is and what do wedeliver,” added Schubert.“Everyone understandsthere’s a need for it butI think it’s fair to say thatthere’s a problem in termsof the definition around itat this point in time.”

But while financial ad-vice delivery is now an in-tegral part of the admin-istration service beingsought by super funds, ad-ministrators’ primaryfocus remains on effi-ciency, data integrity andrisk management. Look-ing at efficiency in isola-tion, the proposed use oftax file numbers and theNational Clearinghousescheme steps in the rightdirection however, Becksaid there was still a greatdeal of ground to be cov-ered, particularly with re-spect to the industry’swider adoption of elec-tronic commerce.

“The Cooper Review isall about efficiencies andwe think that’s a goodthing,” he said. “Efficien-cies and automation aresomething we support 100per cent because thoughthere’s always been theopportunity to have effi-ciencies, it does requireinvestment.”

“With a lot of the thingsthat have been suggestedin Cooper, we could havegot on with them our-selves without regulationbut it did require invest-ment,” Beck added. “AndI think what Cooper’smade really clear is the


government’s asking for thatinvestment to be made in ef-ficiencies and the industrywill respond to that.”

But when it comes to effi-ciency investment, Beck saidthe most important thing isthe need for a return on thatinvestment.

“The efficiencies will comethrough but it needs to be re-membered that most businesscases are based on three tofive year paybacks,” he said.“So the real efficiencies whichget passed on to members willtake some time to feedthrough the system and that’sa reality that the entire in-dustry has to face.”

“Historically, becausethere’s been no bi-partisanagreement on the basics ofsuper, super’s always been abit like a political football,”Beck added. “Every timethere’s a change in govern-ment, there’s a change in thebasics of super and, as an ad-ministrator, we’ve had tospend a lot of money on justkeeping compliant.”

“In some respects, that’squite wasteful when it comesto what members are look-ing for. What we’ve got to tryto do is move the spend fromcompliance to operational ef-ficiency and service and ifgovernments can help us byactually getting bi-partisanagreement to the basics ofsuper and not kicking thatfootball around every time agovernment changes, thenthat will be the precursor forinvestment in operational ef-ficiency and service.”

Illustrating the benefits ofefficiency investment and theindustry-wide adoption of

electronic commerce, Cammsaid the key benefits would bein accuracy and cost.

“We handle up to 10,000cheques a day and even theworld’s best operator is goingto misplace one of thosecheques every so often,” hesaid. “So getting us into anelectronic world will reducethose error rates, money willget into peoples’ accountsfaster and, in the end, thatmeans lower costs for mem-bers, which is always a goodthing.”

However, the showstopper,according to Camm is inertia.“The biggest one is inertia butit’s also resistance at the smallemployer end of the market-place,” he said. “We all carry

a mental model in our headthat employers are all the sizeof Coles, Myer or Bunningsand they’ve got 20,000 em-ployees and they send big pay-roll files on electronic tapes.”

“But of course, the reality isthe vast majority of employ-ers in Australia have less thanfive employees. Every cornershop, or not even a cornershop, which has three part-timers and one full-timer,every tradesman that’s got anapprentice, every doctor who

has a nurse and a reception-ist - they’re all employers,”Camm added. “And a lot ofthose people are terribly en-gaged with superannuationand getting to them somehowand getting them incentivisedand encouraged to use elec-tronic means is a challenge be-cause there are a lot of them.”

Despite this, Cox said themove to electronic commerceand electronic transactionswas one that simply had to bemade.

“These days everyone is on-line to do their banking andeverything else so to me,there’s no excuse,” he said.“It’s inertia or laziness thathas lead to this paper-basedadministration for a large partof our industry.”

“There’s never really beenany incentive for the employ-er to drive things online butwhen it happens, its going tomake life that much easier,”Cox added. “There is obviously

inefficiency in the system, soI think that by moving thingsonline, the big result will be,being able to transfer thecosts of administering paper,collecting paper, filing paper,losing paper, chasing that up.You can take the savings fromthat and put that into yourfront-end and put that intoyour services, spend more onthe administration, on the en-gagement with customers,spend longer time on thephone with them, intra-fundadvice, all of those things.”

“The shape of the dollarspend on administration willchange and give the trustee theflexibility to do so much more.”

So while a lot within Aus-tralia’s super industry seemsset for change, in line not onlywith legislation but also withincreased competition, itseems clear the onus is on ad-ministrators to support fundsthrough this.

“In terms of administration,

this is a low margin business,which requires heavy invest-ment and scale,” he said. “Ourbelief is that to be effective,you’ve got to make the in-vestment in the business, youhave to have operational effi-ciencies, you have to do ad-ministration well and you’vegot to focus on it but morethan that, you can’t have gapsin your services.”

“You have to have a compre-hensive range of services andthat range of service is ex-panding in terms of single-issueadvice, clearing houses, rolloverhubs and so on,” Beck added.“Those are all services and op-erational efficiency measuresthat need to be in place.”

Looking to the future ofsuper administration, Schubertpredicted it would primarily beabout member engagement.

“All the stuff that happens inthe back office, from a mem-ber’s point of view, that will beback office,” he said. “So the in-dustry needs to get more effi-cient, and that’s all well andgood, but by and large, thatwon’t be very visible.”

“It’s like our banking system- people don’t change banksvery often, so while we mightgrumble here and there, whenwe put our piece of plasticinto the wall or we write acheque or whatever, the bank-ing system works for us,”Schubert said. “And that’s theway it has to be with superfunds as well, everything justhas to work and work well.”

“Whenever we need some-thing, it has to be there at ourfingertips and if we can findways to engage with our mem-bers, then they will be loyalbecause no one wants tochange super funds if theydon’t have to.” SR




Peter Beck

Delivering on changed circumstances


FORMER Fortis senior execu-tive and St Andrews Insuranceboss John Van Der Wielen is toreturn to Australia to head upANZ’s wealth management busi-ness. The big banking group hasannounced that Van Der Wielenwill be managing director forwealth in Australia, taking uphis role in October.

Prior to October, current man-aging director of ING Australia,Harry Stout, who is returningto the US next year, will run thebusiness.

As part of the changes at ANZ,managing director of retail dis-tribution Louis Hawke has beenappointed to an integrated roleas managing director of prod-uct, strategy and marketing,while its general manager of re-gional and commercial banking,Mark Hand, has been appointed

as managing director of retaildistribution.

RUSSELL Investments has an-nounced the appointment of Gra-ham Herman as its new direc-tor of capital markets research.Herman’s main role will involveconducting and supervising re-search in various investmentareas.

Herman has 28 years of ex-perience in financial markets,having previously worked in in-vestment management, assetconsulting, investment bankingand corporate investor rela-tions. In his most recent role ashead of investment strategy atCitigroup Australia, he was re-sponsible for asset allocationand equity market advice topension funds.

The head of Russell’s consult-ing business, Greg Liddell, saidthe company was “delighted to bewelcoming an experienced andwell-credentialed professionalwith such a broad background”.

FORMER MLC chief executivePeter Scott has been appointedchairman of Perpetual. Scott willsucceed Robert Savage, who inOctober will step down after nineyears on the board and five yearsas chairman.

Scott’s background is in thefinancial services industry, hav-ing previously worked for Per-petual. His previous experiencealso includes acting as chief ex-ecutive of MLC and an execu-tive general manager of Na-tional Australia Bank. He hasalso held a number of seniormanagement roles with Lend

Lease Corporation and is cur-rently chairman of SinclairKnight Merz and a director ofStockland Corporation.

AXA Investment Managers(AXA IM) has appointed formerMercer global chief investmentofficer Tim Gardener to headits global consultant relationsunit. Gardener will report to theglobal head of distribution andmember of the AXA IM man-agement board, Jon Bailie, andhe takes on the London-basedrole later this year.

Gardener had 33 years expe-rience at Mercer, and had ex-tensive experience in the pen-sions and investment consultingbusiness and Australian super-annuation funds, an AXA an-nouncement stated.

The group stated that his newrole would focus on strength-ening AXA IM’s interactionswith consultants across all assetclasses and geographies. SR

THE head of UBS Global AssetManagement in Australia andNew Zealand, Paul Bolinowsky,has stepped aside from the day-to-day running of the businessand will now be focusing on his

role as head of institutionalsales.

As a result, Ben Heap will bereturning to Australia fromNew York to fill the role ashead of UBS Global Asset Man-

agement in Australia and NewZealand after leading the com-pany’s infrastructure team inthe Americas.

Commenting on the changes,UBS Global Asset Managementchairman and chief executiveJohn Fraser said they reflect-ed the company’s commitmentto developing the business inAustralia and New Zealand. SR

New head for UBS GAM

Events Calendar

Super Review’s monthly diary ofsuperannuation industry eventsaround Australia and abroad.

SEPTEMBER

Victoria

8 – ASFA Luncheon. Cloud Computing –What is it and why should I care? Speaker:In the Cloud Pty Ltd director Steve Sacks.Venue: Park Hyatt Melbourne. 1 ParliamentSquare off Parliament Place, Melbourne.Enquiries: ASFA Member Services Unit. Ph: (02) 9264 9300 or 1800 812 798.

New South Wales

14 – FSC Deloitte Leadership Series Lunch.Speaker: Virgin Blue Airlines CEO andmanaging director John Borghetti. Venue: FourSeasons Hotel. 199 George Street, Sydney.

28 – ASFA Luncheon. Low-cost Super:dream, nightmare or reality? Panellists:Chant West principal Warren Chant; JANAInvestment Advisers head of consulting(Sydney) and executive director John Coombe;Australian Administration Services CEO JohnMcMurtrie. Facilitator: First State Super CEOMichael Dwyer. Venue: The Westin Hotel. No. 1Martin Place, Sydney. Enquiries: ASFA MemberServices Unit. Ph: (02) 9264 9300 or 1800 812 798.

UBS GAM has flown in Ben Heap fromNew York to head the local business.

Fax details of conferences,seminars and courses to SuperReview on (02) 9422 2822

John Van Der Wielen

Peter Scott

www.superreview.com.au APPOINTMENTS 23

ROLLOVER T H E O T H E R S I D E O F S U P E R A N N U A T I O N

Got afunnystory? about people in the superannuation industry?

Send it to Super Review and youcould be raising a glass or two. Super Review is giving away a bottleof bubbly for the funniest story published in our next issue.

Email [email protected] send a fax to (02) 9422 2822.

IT has ever been Rollover’sexperience that asset allo-cation is the crucial differ-entiator between funds thatperform well and those thatperform less well.

And he believes that assetallocation is also importantwhen it comes to holding in-dustry conferences.

Thus, he regards the Fi-nancial Services Council’s(FSC) decision to allocate itsconference to Melbourneearned the organisation alesser return in the minds ofdelegates than the Aus-tralian Institute of Superan-nuation Trustees’ decision toallocate its Australian SuperInvestment (ASI) Confer-ence to the Gold Coast.

There was barely a monthbetween the two confer-ences, yet a world of differ-ence in the returns to dele-gates. The FSC conference inMelbourne generated chillwinds and wet shoes, whilethe ASI Conference gener-ated warm climes, precon-ference golf and a beachsidehotel conference venue.

Is it a case of industryfunds outperforming the re-tail master trusts – yetagain? SR


ROLLOVER usually loves Federal Elec-tions because of the highly confected stag-ing inspired by the major political parties,which is only matched by the highly con-fected ‘shock, horror’ coverage dashed to-gether by the daily media.

That Rollover actually became souredby the 2010 election campaign is proba-bly owed to the less than stellar heightsreached by the political parties, partic-ularly the abject lack of serious policy dis-cussion.

He is still wondering how the Coalitionmanaged to fit its superannuation policy

onto just a couple of A4 pages, but as-sumes it was all part of a minimalist,‘small target’ approach.

Thus by the time he found himselfstanding in a queue for nigh on half anhour to cast his vote, Rollover was morethan ready to suggest that the 2010 elec-

tion campaign was the worst he had everencountered and needed to be brought toa rapid end.

If only he had followed the exampleof a certain superannuation fund chiefexecutive, who told Rollover that he hadavoided the polling day queues by lodg-

Don’t lose your headREMEMBER the movie Highlanderthat came out in 1986 and told thestory of an age-old battle betweenimmortal warriors who can only bevanquished when one decapitatesthe other?

Well Rollover reckons life is cur-rently imitating art in the context ofthe two men vying for the singlechief executive position resultingfrom the amalgamation of two rea-sonably-sized funds.

The only good news for the loser

in the battle for ultimate CEO su-premacy is that he is more likelyto end up with a handsome payoutthan decapitation.

With Highlander in mind,Rollover is told that swinging aScots broadsword is similar toswinging a golf club, and so he sug-gests to one of the individuals thatthere is more at stake than win-ning longest drive – and that heshould therefore keep his headstill. SR

THERE are those in the superannuation in-dustry who suggest that administrators area boring bunch about whom you only hearwhen they get something wrong.

Rollover disagrees. He finds nothing bor-ing about the current competition for man-dates being fought between the major ad-ministrators or the claims and counter

claims around whether those that are win-ning the mandates are actually loss-leadingto gain market share.

Whatever the truth of the matter mightbe, there seems to be no questioning the factthat a number of major funds are the benefi-ciaries of a market in which three playersare hoping a fourth falls by the wayside. SR

Mandatetug-of-war

Sunnyoutlookfor AIST

Electiondoldrums

super review - september 2010

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