Are your super fund’s directors acting in your best interest?

AJ Financial Planningsuper fund superannuationAre your super fund’s directors acting in your best interest?

Members of superannuation funds aren’t entitled to vote on who the directors are. In fact, as a member, do you have a say on anything to do with your superannuation company? Who runs it; how it is run; the direction in the organisation is headed?

The answer is no. The only option most of us have is to vote with our feet: either select another investment option, or select another superannuation fund.

So, does this mean that super funds and the way they are run is less like a democracy and more like a dictatorship?

This question is somewhat interesting. Let’s delve deeper.

The trustees and directors of your superannuation fund should be acting in your best interest and those of all its members. Yet surprisingly, many fund trustees have never asked their members to vote on issues that have a direct impact on them financially.

This month, AMP Superannuation Funds was in hot water with APRA, which subsequently imposed directions and conditions on AMP Super due to potential concerns about its conduct. Did they act in the best interest of fund members? At this stage, it is unclear what the findings will be.

Some super funds do conduct surveys to find out what members want. Media Super mentioned in their 2018 annual report that they had surveyed their members.

This raises yet another question: is a survey different to allowing a member to say, ‘Actually, I disagree and I vote that this board member should not be re-elected’?  A vote can be legally binding and has a lot more power than a ‘How are you feeling about us?’-type survey. Isn’t it about time members have a real voice via a vote?

You may wonder why this is important. It is. Let me explain further.

On 1 February 2019, the Australian Financial Review reported that Media Super had invested in a collectable 429-year-old violin (see our recent blog post https://www.ajfp.com.au/2019/02/15/how-can-i-tell-if-my-super-fund-provider-is-in-financial-difficulty/). As a result of this ‘unusual’ investment, I became interested in the directors of Media Super, and how are they handling the best interest of, and duty of care to, its members.

So, who are the directors or Media Super and why is it of concern? Reading their website, it calls itself the industry ‘super for creative people’ and is focused on the ‘print, media, entertainment and arts professionals’. Their annual report is full of colourful pictures depicting these professions.

It would make sense that the directors also have backgrounds in at least one of these industries, and to ensure the board is fairly balanced from the point of view of skills, capability to perform the role, and experience in different sectors of the industry.

Looking at page 49 of Media Super’s 2018 Annual Report, if my interpretation of this information is correct, it is interesting to note the following:

  1. In 2018, the fund had 12 directors with four alternate directors.
  1. It looks like the AMWU (Australian Manufacturing Workers Union) may have held three of these directorships and the union was paid directly $128,891 for these four seats on the board at $42,963 per person for six meetings per year, with the proceeds all going back to the AMWU.
  1. Of the 12 directors, only four of them were women.

You might ask why is this a problem?

Firstly, I am confused what a manufacturing union has to do with “… media, entertainment and arts sectors and works…” I can see a somewhat-vague link with the print industry, but that is just one small part of the industry as a whole. 

The questions this raises are: does the AMWU really need to have four people on the board to voice their opinions on this organisation; and is there an appropriate level of board diversity, both in terms of male/female ratio and also the range of backgrounds and expertise?

The annual report does not really go into any detail to explain this board composition, or how and why it is servicing its members.

Page 32 of the Annual Report displays the sectors represented and the stakeholders that Media Super has identified. There are 28 organisations from the media, entertainment and arts sector, but the majority of these groups seem to have no representatives on the board. Why is this so?

This throws up yet more questions, which could apply not just to Media Super, but to superannuation more broadly:

1. Is this board stacked?

2. What about gender equality on board positions?

3. Are the directors from a range of backgrounds, skills and experience?

3. When do I get to have a real vote about what is going on with the super fund and its directors?

4. Do I really want to put my life/retirement savings with this group and be a part of this fund?

For some people, the answer to this last question might be a resounding yes! For others, maybe not.

As I mentioned, on the back of the Royal Commission these are just some of the issues super fund boards are facing scrutiny over. A large number of super funds might find themselves having to take a long, hard look at themselves on these and other matters surrounding best interest duties.

If you own a self-managed super fund (SMSF), this is less of a problem and I guess this is why more people are thinking about this option. They are getting fed up with the present arrangements and looking to take control of their own super. Equally, other people are happy to go along with the current arrangements.

Like all things to do with super, it is important that you critically consider the fund you are in and what exactly is going on with your superannuation including fees, performance and ethics, too.

Keep in mind that SMSFs are not suitable for everybody. You need to meet a range of criteria before you can set one up and there are ongoing requirements.

Like all great investment ideas, it is important that you seek professional guidance from a practising and qualified financial planner, and of course I recommend AJ Financial Planning.

 

 

1 Media Super, Our Community, https://www.mediasuper.com.au/about-our-community/super-creative-people, accessed 24 June 2019

2 Media Super Annual Report 2017–2018, https://www.mediasuper.com.au/sites/mediasuper.com.au/files/msup_54061_yearbook18_web_final.pdf, accessed 24 June 2019

3 Ibid.