Sandi Orleow: The state of play for trustees

By Elizabeth Fry

Being a super fund trustee is a tough occupation these days as the whole industry is grappling with a raft of regulatory changes and hurdles.

Yet as a trustee of Active Super, Sandi Orleow says much of the regulation to date provides comfort for boards because its s anchored in members best interests.

Being aligned with trustees' objectives validates the sheer amount of work involved with governing a superfund.

"With Your Future, Your Super, the member outcomes test, the performance test and heat maps and the first round of retirement income strategies, the packs are much larger, and the meetings more frequent," says Orleow.

In 2014, she switched from being a full-time executive in the industry to a non-executive director, motivated by a push to bring more diversity to super fund boards.

There she found that the skills required to be a director suited her investment and finance background.

Importantly, Orleow is a passionate advocate for diversity and inclusion, and in some cases, she says, it's easier to influence an organisation from outside.

She is actively involved in the community and is a member of Chief Executive Women, Women in Super, 100WIF and Women on Boards. Orleow is also is a mentor for Financial Executive Women.

That's why the role of chair of the CFA Societies Australia diversity council appeals.

Orleow claims it provides a great platform to advocate for more diverse representation in leadership, the investment market, and the financial services industry. It also ensures the conversation goes beyond representation to actual inclusion.

"I see the national chair roles as fundamental to work with the national chief executive and executive to channel the high-quality volunteers and members that maintain CFA Membership and increase the probability of achieving the most impact locally," she says.

Evolving an executive career

Looking back, the former Statewide Super investment committee member and WTW head of private markets wonders whether she might have moved away from executive work a little early in her career.

Yet, Orleow's investment expertise puts her in pole position to know what questions to ask and understand where the minefields are.

"So, it wasn't a move away from investments," she adds. "The move to being a trustee was just another way to use that experience."

She sees it as part of a continual evolution rather than a change in her career pathway.

The fundamental problem with so many diversity initiatives and groups in play is that it can dilute efforts or fall victim to creating fiefdoms.

As chair of the diversity council, Orleow strives to collaborate around shared objectives and visions, with success measured on industry impact for all entities.

Most super funds are working towards diversity and have achieved around 30 per cent of women on boards." But it does dilute when you go down into the executive and to the leadership ranks in financial services.

"There are the most incredible women out there - if people can't get women on their boards and in their leadership structures, then they're not looking hard enough," she adds.

New data released by the Workplace Gender Equality Agency reveals that the financial services sector comprises 54.3 percent women and 45.7 percent men.

However, just 10 percent of chief executive roles are held by women.

Gender is the obvious one to target.

Nevertheless, Orleow has positioned herself as an advocate for cognitive diversity - age, race and neuro-diversity.

Inclusion not diversity

Recognising the benefits of diversity is the first step, but the problem goes beyond gender and recognition.

"Most accept the advantages of diversity" she argues.

"What's challenging is getting diverse options heard and included. The issue right now is inclusion and not diversity.

"We need to create an environment that embraces different thinking, creates psychological safety to allow lessons learned from mistakes and encourages people to take contrary views."

As a trustee, Orleow views the regulator as a partner in delivering required member outcomes.

"We must ensure that while funds might have a value proposition, they need to tick several boxes to prove they are a viable business."

Some super funds have pushed back against the severity of the new rules - especially the performance test.

"YFYS is very explicit and without a doubt has impacted behaviour," she notes.

From her perspective, the performance test was a blunt tool to rationalise the market and reduce member costs.

"An unfortunate outcome of a retrospective-based test is that some of the 13 funds failed the first iteration of the test because they were positioned defensively. Their position wasn't recognised in a benchmark testing framework," she adds.

"It is not ideal," she said, noting that the Treasury is looking at how to rearrange some of the benchmarks.

The Australian system is a public offer system, which makes it inherently competitive.

Competition is biting, and the regulations reflect that.

Orleow believes that super funds will find a way to compete in a public offer system.

"Organisations have to be viable to survive and have a unique value proposition. And if not, you would expect there should be a natural consequence."

The biggest headwind

A challenging investing environment is also pretty testing for trustees.

They are looking for absolute returns of CPI plus 3.5 per cent, varying depending on the risk appetite and time horizon.

"A major headwinds we are facing now to meeting return targets is inflation," says Orleow.

While giant pension funds might seem like savvy market players, most investors haven't experienced inflation like this or seen this much volatility.

Says Orleow: "Most funds will have multiple objectives, including peer group objectives and YFYS obligations - that may impact asset allocations - yet the ultimate purpose of the super system is to deliver returns to their members to assist them in retirement.

"You are playing a competitive game against the other funds, but it is not the essence of what you do. Funds cannot and do not lose sight of the CPI plus framing."

"I wouldn't feel good if my fund told me I had lost less than someone else."

Orleow believes people value customisation. "If something is unique to them and it hits the mark, there will be a market. Taking a genuinely member-centric focus is critical to a successful retirement income strategy and offering."

Having been involved in Active Super as an independent, she reckons that knowledge and connection to the members is quite phenomenal,

"Sitting in a board room with employer representatives makes a massive difference because their insights ensure all customers are in the room with you.

That's important as you want to say hand-over-heart that what you're doing is the right for them."

Members might choose to pay a premium price for more active management, better services or advice.

The other white hot topic is the legislated purpose for super.

The new government has shone a much-needed light on a policy shake-up that she argues will impact super funds.

"Is it supposed to be an inheritance passed on to your kids or money you should spend to have a dignified retirement? Or, should the industry be helping younger people buy a house?

"It's a confusing conundrum," she says.

"I've heard many different interpretations of the purpose of superannuation.

Once the overarching role of superannuation is clarified, funds will better understand their role as long-term investors. "Also, the retirement income covenant is already encouraging the industry to broaden its focus beyond accumulation towards good retirement outcomes for members."