Sensible reform is needed to rebuild trust and confidence

The superannuation industry must show leadership by making the necessary changes to better manage conflicts of interest, according to The Association of Superannuation Funds of Australia (ASFA).

In its submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, ASFA recognised the important role the Commission has played in bringing to light areas of industry conduct and regulation where improvements are needed.

ASFA CEO, Dr Martin Fahy, said that while we await the Commissioner’s final recommendations, it is imperative that industry and regulators begin work on identified issues immediately, to rebuild trust and faith in the system.

“Addressing community standards and expectations is at the heart of engendering confidence in the system. Perceived and actual conflicts of interest, if not managed appropriately, do the opposite.

“Given the fiduciary nature of superannuation it is reasonable to expect that, at a minimum, savings are managed with a high degree of prudence and integrity by trusted institutions,” said Dr Fahy.

ASFA’s submission recommends developing stronger regulatory frameworks and improving conflicts management, including through:

• ending grandfathered trailing commissions paid to financial planners
• enabling the regulator to impose a sanction for a failure to act in the best interests of members
• clearer demarcations in governance structures of trustee boards and related parties

Dr Fahy said that while there is a need for strong frameworks to manage behaviours, there is no overwhelming evidence to support a prohibition on particular structures.

“It is important to acknowledge that the superannuation system is already delivering significant improvement in retirement living standards for all Australians.

“Superannuation makes a substantial difference to the adequacy of retirement income and the ongoing affordability of the Age Pension. This national beneficial outcome is the backdrop against which changes to the regulation of superannuation ought to be considered.”

For further information, please contact:
Katrina Horrobin, 0451 949 300.

About ASFA
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.