An ASIC review of performance communications by trustees that again failed the annual performance test for MySuper products in 2022 has highlighted that while improvements have been made, some trustees need to be more member-centric in their approach. This is an area of industry weakness and a common conclusion when ASIC reviews member communications.
ASIC reviewed member communications by the four superannuation trustees that failed the test for a second consecutive year in 2022. Under the law, these trustees cannot accept any new members into their MySuper products. ASIC’s review looked at whether the performance test communications of these trustees reflected expectations set out in ASIC’s Report 729 Review of trustee communications about the MySuper performance test (REP 729).
‘The performance test supports transparency of superannuation product performance so members can make informed financial decisions for their retirement,’ ASIC’s Commissioner Danielle Press said. ‘Trustees that fail the performance test need to get the balance right in their communications – they need to be transparent and factual about the performance of the failed product.
‘Our review found that the trustees took into account the guidance provided in our report (REP 729) last year and have made progress. Trustees complied with the mandatory disclosure obligations to notify their members of the failure, and had good processes to ensure that no new members joined the closed products. However, we found that some trustees need to design and deliver performance communications with their current members in mind.’
ASIC’s review found that some trustees took a reactive approach to performance test communications or significant events such as mergers and did not have cohesive communications strategies in place. This meant that their communications to members were inconsistent or lacked clarity. To ensure that members understand the impact of relevant changes, trustees should consider from a members’ perspective what communication members will receive and when.
Other areas for improvement included:
providing consistent messaging about performance across the fund website;
ensuring that communications about short-term performance, products and mergers are balanced and don’t undermine the fact that the product failed the test; and
providing clear call-centre transcripts for staff to discuss the performance failure or product closure and related options with members.
Prior to the review, ASIC wrote to the trustees that appeared likely to fail a second time, and set out expectations about updating product disclosure statements and issuing significant event notices. ASIC observed that trustees interpreted these obligations differently and provided feedback to them on this and other areas for improvement.
Since ASIC’s review, one fund that failed the test in 2022 has merged with another fund*.
‘As the performance test expands to trustee-directed products, I strongly encourage trustees to assess their approach to member communications, reflecting on the suggested areas for improvement. Trustees should bear in mind ASIC’s expectations for balance, prominence and clarity in their performance communications to members,’ Commissioner Press said.
ASIC will continue to monitor underperformance notifications and other communications by trustees that fail the annual performance assessment. Where a failure to comply with disclosure obligations is identified, ASIC will consider regulatory action if appropriate.