'No basis' to ban independent trustee model: Equity Trustees

Equity Trustees has made a submission to Treasury on Enhancing Member Protections in the Superannuation System saying there is "no sound basis" for banning the professional independent trustee model.

Equity Trustees said independent trustees look after the interests of 990,000 members and has grown from approximately $10 billion to $150 billion in ten years.

"The professional independent trustee model has been the fastest growing segment of the superannuation market in the last ten years and has been responsible for material innovation in the industry," it says in the submission.

"The model has a solid record of delivering to members and has not suffered from the high-profile systemic failures that have been prevalent in the vertically integrated in-house models - both commercial models and not-for-profit models."

Equity Trustees said it strongly supports proposals by Treasury to reform managed investment schemes (MISs) and their responsible entities (REs), as well as the regulation of lead generators.

It said the most critical point of failure in the value chain regarding Shield Master Fund and First Guardian Master Fund were the two responsible entities.

"The misuse of scheme assets for purposes other than investment as disclosed to investors - as the liquidators' reports have revealed - is clearly fraud or theft causing loss to the superannuation funds and their members," Equity Trustees said.

"We welcome the reform of MISs and their REs that was the subject of Treasury's first consultation and ASIC's consultation in respect of the net tangible asset capital requirements for REs."

Equity Trustees added that the platform market has been the most responsive sector of the superannuation industry in providing services to members and meeting their personal objectives.

It said the platform market, together with the aligned SMSF market ($1.8 trillion FUM), offers products and services that are most closely aligned to the Retirement Income Covenant (RIC).

It said in its submission that recent licence conditions introduced by APRA on trustees of platforms will lead to some narrowing of investment choice on platforms.

"Equity Trustees contends that this APRA initiative alone is sufficient to ensure the continued efficient, fair and honest functioning of the superannuation platform market and that further regulatory changes are not required - the market is already the most fit for purpose superannuation market segment," it said.

In its submission, Equity Trustees argued it would not be feasible for the drafters of the legislation to precisely define between 'platforms' and 'RSE Licensee of platforms' given the offers provided by all superannuation funds are increasingly overlapping and will do so more in the future as more funds design offers demanded under the RIC.