ASIC, ASFA spar over super fund trustees 'not knowing' their business

ASIC chair Joe Longo has torched the superannuation sector, branding it the "poster child" for what can and does go wrong when governance implodes, while accusing directors of "not knowing" their business.

In a speech at the Australian Institute of Company Directors Australian Governance Summit, Longo pointed to AustralianSuper's alleged delayed processing of nearly 7000 death benefit claims and its failure to merge multiple accounts, Aware Super charging fees for no service, Westpac/BT incorrectly charging insurance commissions to members, and Colonial First State misleading members as examples of funds not knowing their business.

"At the heart of this issue is leadership that doesn't have a grip on the fund's data, systems and processes - and the customers who suffer for it," Longo said.

"This kind of disconnect is unacceptable in any area of corporate Australia. But in the superannuation sector it is particularly serious, because super literally affects everyone."

Longo said the governance challenges facing the superannuation sector relates to "foundational duties and expectations of directors" and suggested some simply aren't asking the hard questions, grasping all aspects of the business and its risks, or challenging management to ensure their understanding is well-founded.

"Effective governance requires rigorous, diligent back-and-forth between management and the board. The board should support management - but it must also question it," he said.

Association of Superannuation Funds of Australia (ASFA) chief executive Mary Delahunty, however, said the criticism from Longo was "unfounded and unfair."

"Australia's phenomenally successful super system is the envy of the world, and with good reason. The typical balanced superannuation fund returned 10.5% to members last year, with some funds returning up to 12%. This is real money in the pockets of real people and comes about through prudent investment and management," Delahunty said.

"These kinds of returns would simply not be possible if the boards overseeing the governance of super funds didn't know their business extremely well."

Delahunty also said that publicly deriding trustees who oversee institutions that provide Australians with excellent returns on one of their most important investments is "puzzling."

"Calling one of our country's biggest success stories 'the poster child for what can and does go wrong when governance fails' isn't constructive - it's confusing over-reach..." Delahunty said.