On Friday 30 April 2021, APRA and ASIC held the inaugural Superannuation CEO Roundtable. The focus for the Roundtable was the implementation of SPS 515 Strategic Planning and Member Outcomes (SPS 515) and Product Design and Distribution Obligations (DDOs).
Hosted by Helen Rowell, Deputy Chair, APRA and Danielle Press, Commissioner, ASIC, the roundtable was attended by eleven superannuation trustee CEOs, representing all sectors of the industry (see Appendix I for the full list of attendees). Other attendees from APRA and ASIC are also listed in the Appendix.
SPS 515 and DDO
Opening remarks from APRA and ASIC focused on how the requirements in SPS515 and the DDOs are complementary and together challenge trustees to have a continuous improvement mindset:
APRA will be sharing its findings on SPS515 in the coming months but noted that issues with the implementation observed so far include a lack of specificity, justification and rigour in methodologies, strategic projections and objectives.
ASIC has been engaging with industry, primarily through industry associations, and has observed a wide variation in DDO readiness. Better practices include focusing beyond target market determinations to overall product governance.
There will be an evolution in sophistication of approach over time in both regimes.
CEOs noted that the work undertaken to meet SPS 515 has added value to their strategic planning process and encouraged new ways of thinking at the senior executive and board level about metrics and strategic outcomes.
Data and data governance was a common thread throughout the discussion, with CEOs noting an increased maturity in how they used and managed data. However, they also expressed a desire for consistent and richer data to be provided more frequently by APRA. Measuring member outcomes was raised and whether there is a future for the use of risk adjusted returns to account for different investment strategies.
The CEOs noted that work is currently underway on implementing DDO requirements within their funds. Many CEOs observed that the DDOs had prompted them to consider more deeply how to better match product design and member needs. However, there are challenges in applying the legislation; for example there was ongoing discussion in the industry about what defines a product versus an investment option, how the MySuper exemption applies in practice and whether clearing houses were captured or exempt under DDO. CEOs requested further clarity and guidance on these matters.
In response to the issues raised, APRA and ASIC noted that that there are opportunities to work with the industry on data governance and management. APRA is currently transforming its data collection and working closely with ASIC and the industry on this project. It was noted that measurement of member outcomes is an area of ongoing development and APRA and ASIC are keen to work with the industry to refine measures over time.
ASIC encouraged trustees to take a holistic approach to the DDOs, noting that there can be benefits in applying this thinking across all their products. This is particularly the case where products share key features such as insurance. ASIC confirmed that clearing houses are caught by the DDOs, but welcomed views from the industry on this. ASIC will continue to communicate with industry on the various issues raised by the implementation of the DDO requirements.
The main discussion was followed by an open forum where matters such as the Financial Accountability Regime and the upcoming trustee indemnity changes were raised and considered by attendees. APRA noted that a discussion paper focussing on trustee reserving and resilience, which would touch on the trustee indemnity changes, would be released mid-2021.
There was consensus among the attendees that the Roundtable format was a valuable arena for CEOs representing different types of superannuation funds to meet and discuss common topics and issues. On the basis of this success, APRA and ASIC will host another Roundtable in the second half of 2021 with a different theme and mix of attendees.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $7.9 trillion in assets for Australian depositors, policyholders and superannuation fund members.
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