Change has been a characteristic feature of Australia's superannuation industry. Whether it's been driven by the relentless pressures of competition and globalisation or the demands of consumers for lower fees, better service and more choice, change, you might say, is here to stay!
The fraud workshop I am opening here today is a case in point. In 1996, the insurance and superannuation commission conducted its first series of workshops around the country. They concentrated on how to detect and prevent traditional forms of fraud. The workshops were, by all accounts, successful and well attended.
Two years later the commission is staging a new round of fraud workshops but this time the emphasis is on electronic commerce. Such has been the growth and industry dependence on new technologies and more powerful and sophisticated computer systems.
Electronic commerce offers immense possibilities for improved cost efficiency and better customer service. But with new technology also comes new opportunities for the ever present risk of fraud. Wherever there are large sums of money there is always the risk of fraud.
These insurance and superannuation commission fraud prevention workshops will show you in a very practical way how to reduce the risk of fraud occurring in your fund and they'll identify the risks which you must guard against.
The key message from workshops like this is simple but critically important - get to know all about your fund, because it's your responsibility and vigilance requires familiarity.
The collapse last year of three investment schemes that had been actively marketed to superannuation funds (among other investors) was a matter of concern for government and industry regulators. These were cases where investors were induced by promises of returns well above prevailing market rates. If promises of returns of twenty to thirty percent in today's non-inflationary markets seem too good to be true, they probably are!
Exposure to high risk investments - and in particular exotic or 'get rich quick' schemes - is not a prudent investment strategy for superannuation where the main aim should be to ensure income for retirement.
Another feature of these failed investment schemes was that they were not mainstream investments. Sales pitches were spread by word of mouth and direct selling to a selected number of individuals. Sadly too many investors believed it and got burned.
The government and the ISC would like to reduce the risk of that happening again. That is why the Commission has produced this handy, easy to read brochure on investment issues called "tips and traps for trustees".
It sets out, in straight forward and simple terms, the steps trustees should take when considering an investment strategy. There is no mystery to the process of protecting your retirement investment - just take a common sense approach.
When preparing an investment strategy, trustees should think long and hard about:
- The circumstances and requirements of their members;
- What's most appropriate to their needs; and
- What strategy best provides the stability, security and sustained growth so essential for retirement income.
Planning and implementing your fund's investment strategy is probably the most important responsibility given to trustees. So take account of the risks and returns of each investment and of prudent diversification. Prudence and patience and careful planning must become essential rules for trustees.
And remember, gambling should be confined to the casino and the personal cash you are prepared to lose. It is not appropriate to gamble with the superannuation funds entrusted to your care.
I commend the brochure to you. You have a copy in your resource kit and I trust that the lessons learned from last year's collapses together with the strategies you will hear today will better equip you all to better protect the hard earned retirement income of your fellow Australians.