Superannuation fund trustees must be pragmatic when resolving conflicts of interest, according to Russell Investments director of fiduciary research Scott Donald.
Donald chaired a Fund Executive Association Ltd (FEAL) forum session on the topic of trustees and conflicts of interest in Sydney last week.
"It is a very important issue because trustees are acting on behalf of millions of Australians and you want to make sure there are common interests and clarity of expectations. They are only nominally elected, which means putting an enormous amount of trust on those individuals," Donald said.
Donald recommends that each conflict be looked at on a case-by-case basis.
"There are aspects of the superannuation arena where conflict is anticipated, and while strategies may have an application in certain circumstances, they may not always be the right thing to do," Donald said.
"There needs to be a pragmatism to seek out issues and how best to resolve them."
Donald also said transparency was critical in the superannuation industry as it gives fund members confidence.
According to Donald there were a number of potential conflicts that trustees faced.
"Problems can arise as a trustee of multiple funds because you have to look to two different masters. A trustee could also be a member of the fund themselves or a director or associate with a financial management company," Donald said.
"This situation they find themselves in makes it difficult for them to separate one interest and duty from another set of interests and duties."
However, Donald said there was little evidence of conflict of interest being a real problem in the Australian superannuation industry.
"If you look at the carnage in the markets, very little has to do with trustees doing the wrong thing. I think there is something inherent in trusteeship that causes them to act better than they might otherwise," he said.
