A new battleground is emerging in the realm of superannuation, with increased scrutiny on trust and governance within the industry. Former treasurer Wayne Swan recently faced a Senate inquiry regarding the scandal surrounding the super fund he chairs, emphasizing the superior performance of industry funds compared to retail funds. The unique governance structure of industry funds, with equal representation from unions and employers, has been credited for their investment outperformance over the years.
While the relationship between board structure and investment performance is complex, the industry is witnessing a shift where lower management fees are no longer a significant competitive advantage for industry funds. As the performance gap between industry and retail funds narrows, attention is shifting towards trust, customer service, transparency, liquidity, and accountability within the superannuation sector.
Liberal senator Andrew Bragg, who chairs the Senate inquiry, has raised concerns about the governance model of industry funds, advocating for a more diverse board composition with a broader skill set of independent directors. This issue has been a topic of discussion in the sector for years, with various recommendations made to revise the board composition of superannuation funds.
As members of super funds become more vocal about their concerns, the trust gap between industry and retail funds is diminishing. Service quality has emerged as a critical factor influencing trust levels, with retail funds making strides in delivering better service to challenge the traditional trust advantage held by industry funds.
With the superannuation sector reaching $4.1 trillion in assets, regulators are increasingly focused on ensuring the stability and integrity of the system. Concerns have been raised about potential risks posed by the sector’s size, prompting calls for improved oversight and governance of super funds, particularly in relation to unlisted investments and valuations.
Regulatory bodies like ASIC and APRA are gearing up to enhance accountability and transparency within the super industry, utilizing new powers to address issues such as conflicts of interest, operational resilience, and misuse of member funds. The upcoming scrutiny on super funds signals a significant shift towards greater accountability and governance in the sector.
As the superannuation landscape evolves, the days of passive members disengaged from their fund’s performance are waning. Members are becoming more discerning and proactive in evaluating their fund’s service quality and performance, indicating a growing demand for transparency and accountability within the superannuation industry.
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