Newly relicensed fund supervisors are looking to embed value-for-money (VFM) as business-as-usual as the first compliance deadline looms.
Angus Dale-Jones, executive director of the Corporate Trustees Association (CTA), said supervisors and managers were well-advanced in complying with VFM regulatory guidelines introduced last year with a few final details to tidy up.
“All managers should have completed the first go of assessing their funds against the Financial Markets Authority [FMA] value-for-money spreadsheet,” Dale-Jones said. “But funds have a June 30 deadline to identify any [VFM] issues.”
However, he said the sector was better-prepared to deal with VFM challenges more than two years after the regulator released industry guidance to the sector aimed at clarifying the link between fund fees and ‘value’ for investors.
“We now have greater clarity on the value-for-money process,” Dale-Jones said. “And we have more data on contentious areas such as performance fees that can feed into a better discussion [between supervisors, managers and regulators].”
While VFM has probably delivered the biggest shake-up to the licensed fund industry in recent times, he said the sector was ready to normalise the practices.
“There’s an eagerness on all fronts to ensure value-for-money is not just a one-off adjustment but moves to business-as-usual… and from July 1 the focus will be on making that transition,” Dale-Jones said.
Supervisors serve on the regulatory frontline with responsibilities to ensure licensed fund managers (as well as other entities including retirement villages) comply in detail with legislation and FMA instructions such as the VFM guidance.
And the small clique of supervisors is also gearing up for a refresh after the FMA finalised the five-yearly statutory relicensing of the sector.
Guardian Trust and its subsidiary, Covenant Trustee Services, received their respective regulatory accreditations last week, joining the three other players – Trustees Executors, Public Trust and retirement village specialist, Anchorage – that had been rebadged months earlier.
Dale-Jones said the relicensing sets ground rules for the relationships between supervisors and the FMA, which rely on continuity to function effectively.
“The FMA has been through a big structural change and they have some new faces to get to know – supervisors, too, have some new people,” he said. “Relicensing confirms the formal side of things but it’s more important that regulators and supervisors have enduring relationships and strong connections.”
As well as bedding down VFM practices, Dale-Jones said fund supervisors are also tackling other issues such as climate-reporting rules, ESG compliance (including greenwashing risks) and imminent liquidity management guidance (due later this month).
The licensed supervisor universe also extends to retirement villages and some non-bank deposit-takers – where both sectors are currently undergoing regulatory overhauls – and implementation of the Financial Markets (Conduct of Institutions) Amendment Act 2022, also known as COFI.
Dale-Jones, who previously held senior positions with both the Australian and NZ financial regulators, took up the part-time CTA role last July as the industry body rebranded from the Trustee Corporations Association. He is also currently chair of the Financial Adviser Code Committee.
The CTA represents the interests of the five licensed supervisors with the new name reflecting its focus on corporate trustee issues rather than individual trust matters.