Jonathan Steffanoni

Novigi has announced a decision to close specialist superannuation law advisory practice, QMV Legal.

To be formally closed on April 26, 2024, the decision follows the February 1 acquisition by Novigi of 100% of the QMV Solutions business.

Novigi CEO Ash Priest praised the founders of QMV Legal, noting the practice’s strong contribution since 2019 to superannuation fund trustees and their specialised needs for high-quality governance, regulatory compliance, and commercial legal advice.

“QMV Legal has made a significant impact, however a law offering is not quite a natural fit or aligned to our role as the data and technology partner to the superannuation and wealth sector in Australia. After careful review and in collaboration with the QMV Legal senior team, we have mutually agreed that the best option is to close QMV Legal.

“Novigi will continue to collaborate very actively with the outgoing QMV Legal team, and we welcome the news that Managing Partner Jonathan Steffanoni will bring a new superannuation law brand and offering to market. We will engage Jonathan’s new firm on a strategic retainer to support our team and clients in the regulatory and legal domains,” Mr Priest said.

Mr Steffanoni said: “Novigi and I both view the separation of legal and technology businesses as the right path to offer the best future for our clients, allowing both organisations to focus on different core areas of expertise.

“QMV Legal was established in 2019 to provide legal advice from a perspective that is closely placed to the business operations of superannuation trustees. We are grateful to have advised clients on a broad range of matters, including successor fund transfers, regulatory change and investigations, and material service provider contracts.

“As we transition from QMV Legal to establish a new independent business structure, Legal and Prudential Advisors, we will remain focused on providing expert legal, risk, and compliance advice to trustees of APRA regulated superannuation funds,” Mr Steffanoni concluded.

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Jonathan Steffanoni

Despite maintaining one of the most efficient and progressive retirement savings systems in the world, Australia should heed some lessons from overseas in 2020 if it’s to remain as pre-eminent in the years to come, according to QMV Legal partner, Jonathan Steffanoni.

Mr Steffanoni believes the velocity and breadth of change in the superannuation industry has been a challenge to many superannuation funds and industry professionals but, in order to continue as a global leader, the system needs to remain open to new ideas.

“It’s too easy to become narrow and focused in our perspectives and thinking but learning from developments abroad can only help the system to provide the best possible outcome to super fund members,” he said.

Following a recent trip to the UK to meet with regulatory and pension professionals, Mr Steffanoni said Australia shouldn’t rest on its laurels, and should take some informed guidance from the likes of the UK which, in recent years, rolled out auto-enrolment reforms.

Between 2012 and 2017, the UK extended coverage of default employer and employee contributions to most of the workforce. Contributions have risen from 3 per cent to 8 per cent of salary, with opt out rates remaining relatively low.

Mr Steffanoni believes the mandatory nature of the superannuation guarantee (SG) level has shifted the attention of Australian superannuation funds on to policy debates about the appropriate ‘minimum’ level of SG, rather than focusing on assisting members in setting an appropriate level of contributions based on their living expenses, projected future income, and goals for retirement.

“Many Australians assume that government calculated minimum level of savings must be enough. Giving individuals the ability to opt out can promote greater interest and involvement, which can also result in personally aligned decisions around the right level of contributions from savings for retirement,” he said.

The UK government also initiated a project in 2016 to develop a Pensions Dashboard, which will provide an online centralised view of all pension benefits and entitlements, which could prove beneficial to the Australian superannuation system if adopted in a similar form.

“The UK Pensions Dashboard will include detail of any government pension entitlements that an individual has, in addition to any occupational pensions.

“Obtaining access to information about government benefits and entitlements in a standard and secure format has been an ongoing challenge for superannuation trustees and financial planners in providing technology-enabled personal financial advice, so there are very possibly lessons to be learnt here,” Steffanoni said.

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Jonathan Steffanoni

The release of a senate inquiry report suggesting extending the Consumer Data Right (CDR) to superannuation and pensions information, will lead to increased competition and improved transparency, but there are also reputational and competition risks to consider, according to QMV Legal partner, Jonathan Steffanoni.

The CDR is a competition policy which seeks to ensure that individuals have the right to access and review data held by institutions which relates to them. Open Banking, the first application of the CDR, has created an opportunity for the super industry to register as data recipients, and with member consent, use member banking information to build a better profile of the member’s overall financial situation and improve levels of personalisation.

Mr Steffanoni believes by incorporating super and pensions into the CDR – as recommended by the Productivity Commission – it will lead to the development of innovative self-service financial planning tools which will benefit consumers and reduce the costs associated with comprehensive financial planning.

However, he said there are a number of challenges to be faced in implementing the proposed changes.

“The CDR inherently introduces the strategic risk of asymmetric competition, with the possibility of third-party applications being developed to occupy the space between members and super trustees. This would see superannuation trustees losing some control over the way in which they interact with members.

“Another prominent risk is reputational, with a growing public awareness and sensitivity about the ethics and economics surrounding the use of personal data. Super trustees will need to be aware of the risks of perceived inappropriate use of member data when personalising engagements and services,” he said.

Mr Steffanoni said ensuring the accuracy, quality, timeliness, and completeness of data under the terms of the CDR regime also warrants considerable assessment if it’s to be effectively implemented.

“There are civil penalties associated with data holders failing to ensure adequate data accuracy, with super trustees needing to ensure that robust data quality monitoring frameworks are in place and adhered to.

“The use of existing standards and infrastructure, including the ATO’s Member Account Attribute Service and Member Account Transaction Service reporting mechanisms – might mitigate some of the implementation challenges,” he said.

Mr Steffanoni also believes that along with adequate sector-wide consultation, a gradual approach to transition is necessary to ensure adequate planning and oversight by regulatory bodies including the Australian Competition and Consumer Commission.

“The CDR will ultimately provide consumers with greater control and confidence over the uses of data which they choose to share.

The introduction of new rules will bring much needed confidence to consumers, he said.

“While data sharing is not new, the Consumer Data Right will result in consumers having greater control and confidence over their personal data, how it is used, and what they choose to share.”

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Jonathan Steffanoni

While the Federal Government’s proposed increase in the Superannuation Guarantee (SG) could result in some workers taking home less pay, the incremental increase is likely to benefit lower and middle-income Australian’s, according to QMV’s principal consultant, Jonathan Steffanoni.

The current rate for SG payments made by employers is 9.5%, with this rate set to continue until 1 July 2021 when it increases to 10% before settling at 12% from 1 July 2025. The likelihood of employees taking home less pay will be contingent on how wages are set, the frequency and regularity of determining employment arrangements, and the wording of individual and collective employment contracts.

According to Mr Steffanoni, the planned increase is sound economic policy and beneficial to the retirement savings of Australian’s, however caution is warranted to ensure broader economic conditions and the labour market remain adequately elastic to absorb the associated cost.

“Broad assertions that the planned increase in SG will add to the cost of living pressures faced by many Australians don’t really stack up to closer scrutiny. This may simply be due to misunderstanding of the complexity and nuance in the way the SG and labour markets function.

Mr Steffanoni said that “rather than adding to cost of living pressures by reducing take home salary, an increase in SG for the 23% of Australian workers on lower salaries set by Modern Awards will increase the retirement savings of those who are set to benefit most, as wages aren’t set by the market and provide for SG in addition to salary.

Young Australians early in their careers and workers in lower paid industries often face the most pressing cost of living challenges, and it would be this demographic to benefit most from an increase in the SG. As casual employees on monthly incomes of less than $450 are not covered by the current SG system, they would also benefit from an increase in the SG and the removal of the $450 rule.” he said.

While Mr Steffanoni concedes there will be some of the 37% of workers on individual employment agreement which relies on a “total remuneration package, inclusive of SG” who could see a direct reduction in their take home pay with an SG increase, a vast majority of the 40% of workers covered by a collective agreement would be unlikely to see a direct reduction.

Mr Steffanoni also emphasised that “the salary of employees on individual or collective agreements often falls below market value, particularly where employees remain in the same role or with the same employer for a longer period. There may be pay increases, but these typically don’t keep pace with the market.

An increase in the superannuation guarantee is a blunt but effective mechanism to force improvements in labour market efficiency in times of low unemployment and wage growth – times such as those we are currently experiencing.

Consideration needs to be given to the impact on economic conditions affecting future salary increases and new agreements,” said Mr Steffanoni.

The SG has been effective in extending coverage to about 90% of the Australian workforce and while employers are not legally obliged to contribute, tax incentives have this far proven beneficial in incentivising most employers to adopt the regime.

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Jonathan Steffanoni

While the introduction of the Consumer Data Right Bill into parliament has been delayed, it needs to be a priority for the government in 2019, as it is welcome first step in addressing the imbalance of bargaining power between the holders and subjects of data, says Jonathan Steffanoni, principle consultant, legal and risk, with QMV.

“The Consumer Data Right could be described as the first new human right for the digital age. This Bill – along with Open Banking – puts the power back in the hands of the people.

“Australia has shown global leadership in creating an economy-wide right for consumers to have greater control over their data, and it is disappointing that this Bill was not introduced into parliament last week,” he says.

Open Banking and the Consumer Data Right is part of competition policy intended to ensure the power relationships in the economy do not become unbalanced and out of whack.

“The Consumer Data Right intends to address the problem of too much information being concentrated within the control of a small number of organisations, stifling competition, innovation and efficiency in the economy.

“Data has become a valuable commodity which forms the lifeblood of the information economy, the domain of many of the most powerful organisations, including financial institutions.

“Getting the data related regulatory settings right is an important component of ensuring that there is adequate competition in the information economy.

“Those who control data will find themselves in positions of great power and commercial advantage. There has been a proliferation in data production and capture, and much of this is controlled by tech and financial institutions.”

Mr Steffanoni says the Consumer Data Right and Open Banking will change the technical and competitive landscape for superannuation funds.

“The limited commencement of Open Banking from 1 July 2019 will create a window of competitive opportunity for businesses to become accredited data recipients and utilise the rich financial data which will be shared under the Consumer Data Right.

“Following this, the inevitable prospect of Open Super is primed to supercharge innovation and competition in the fintech, regtech, and financial services industries,” he says.

While Open Banking is the first iteration of the Consumer Data Right, utilities and telecommunications will also follow, Mr Steffanoni says.

“While data sharing is not new, the Consumer Data Right will provide consumer with greater control and confidence over the uses of data which they choose to share.”

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Jonathan Steffanoni

Proposed superannuation industry reforms from the Royal Commission are likely to cover four main themes including simplification of the law and of disclosure requirements, appropriate civil penalties for breeching best interests duty and an end to grandfathered commissions, says Jonathan Steffanoni, Principal Consultant, Legal & Risk at QMV.

“The future of financial product disclosure probably looks more like SkyScanner and less like an old fashioned phone book,” Mr Steffanoni says.

“Current product disclosure is based on the premise that individuals are at liberty to freely decide what they want, and what’s best for them, and are capable of actually doing that. In reality, this is often not the case.”

Mr Steffanoni says regulation, by way of product disclosure, assumes that individuals are:

• adequately financially literate to understand what they are reading
• motivated, engaged and have the time to read product disclosure documents
• have all the information necessary to make an informed decision about what is best for them, and
• continue to remain attentive to changes in product terms which are disclosed.

“Most people simply don’t have the attention or the patience to wade through product disclosure — let alone compare it to alternatives in the context of their personal circumstances.

“Recommendations directed at simplifying the disclosure laws would benefit from considering the increasing reliance people are likely to have on the data economy which will enable the fast comparison of financial products and allow individuals to consider their financial profile and the product that will best meet their needs.

“The Royal Commission may consider whether now is the time to recommend the extension of the Consumer Data Right to superannuation products, to require product disclosure in machine readable API format. This would enable consumers to utilise smart phone apps and other online services to compare and assess key product features in a familiar and user friendly manner.”

Additionally, Mr Steffanoni says a shift towards simplification of financial services and superannuation law may see greater use of principles-based standards – much like prudential standards – and associated soft law guidance.

“The demands for absolute clarity and certainty on the one hand seem to be giving way to a simpler, and more flexible, principles-based regulation.”

“While simplification can be an effective regulatory approach, it will also require that industry and the public accept greater levels of uncertainty and regulators are prepared to actively interpret and apply the principles.”

Civil penalties for superannuation trustees breaching best interests’ duty will be another likely recommendation. But he cautions: “While creating incentives for conduct and business practices which promote the best interests of superannuation fund beneficiaries is a sensible policy objective, caution may be required in ensuring that the form of any change operates as intended and doesn’t create too much uncertainty.

“The reality is that actions against superannuation trustees for breach of this duty have been few and far between, and the individual complaint resolution schemes – such as SCT, FOS, and now AFCA – have been effective in addressing most individual grievances.

“The imposition of civil penalties as a result of a breach of the best interests duty could fundamentally shift the responsibility for making such a determination from a court to the regulator, presumably APRA.

“This would likely create demands for detailed guidance on what exactly is meant by best interests in various contexts. It would also raise the prospect of judicial review of the administrative decision by a regulator to make a quasi-judicial assessment.

“Superannuation law is already considered to be complex. Adding an additional layer to the best interests obligation runs the risk of making trustee obligations even more opaque and confusing for both trustees and consumers. In a profit-for-member context, it might also mean that beneficiaries ultimately end up paying any monetary penalties.

“More interesting still, and possibly more important, is the question of whether a new best interests obligation would extend to Trustee Directors or senior managers personally, much as the Banking Executive Accountability Regime (BEAR) regime places responsibility on individuals rather than the corporate entity.”

Finally, he says the closest we might come to consensus agreement in recommendations, is in relation to ending grandfathered commissions from superannuation accounts.

“There was only a single objection to this recommendation in the interim report. This should happen as grandfathered commissions paid from superannuation accounts serve no useful purpose,” Mr Steffanoni says.

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Jonathan Steffanoni

The superannuation industry should prepare for an “open super” regime in the next few years, in light of current moves towards “open data” and “open banking” and the fundamental shift in the balance of power in the information economy, says Jonathan Steffanoni, principal consultant – legal and risk at QMV.

“We are seeing growing momentum towards placing power in the hands of individuals, and a greater responsibility on institutions when it comes to managing information and data,” Mr Steffanoni says.

“People are becoming more and more aware of the value of their information and demanding to take back control, driving a shift towards “open data” and the mooted Data Sharing and Release Act.

“The current fiasco around Facebook and the selling of user’s personal data to private companies provides a window into a much broader problem.”

“Financial institutions managing other people’s savings also manage other people’s data. Trusted relationships will demand that institutions do more than merely have individuals click to agree on having their data shared without understanding the implications.”

“The superannuation industry will not be immune from this.  Already we are seeing moves towards “open banking” in Australia, which will give customers greater access to and control over their banking data; with utilities and telecommunications to follow. Pension and superannuation funds are a logical next step.

“While open banking hasn’t happened yet in Australia, it is already happening internationally, and a reform pathway has been forged here over the past couple of years. A series of reviews, inquiries, and public policy announcements suggest that we’re on the verge of open banking from mid 2018.

“Open banking will mean that information such as transaction and loan repayment data will be available to customers with their consent, who should then be able to use that data to access better financial products or services in a safe and secure manner.

“It would be an anomaly if the superannuation and pensions industry were not the subject of new laws to govern the opening up of member data to members.”

However, Mr Steffanoni says that institutions should see this as an opportunity, not a threat.

“In an environment where policy makers are looking at ways to promote greater levels of engagement and competition in the industry, innovation around the way super funds interact with members presents a significant opportunity and can add value to the services they provide.

“It is an opportunity to create better outcomes for members, and indeed to continuously improve Australia’s position as a world leader in retirement incomes.”

Mr Steffanoni says that open data involves the idea that some data should be freely available for use by the people it relates to, in flexible ways which aren’t tied to a particular technology or organisation.

“The “some data” aspect is important. While there are large amounts of data which are intellectual property and therefore controlled by whoever holds the rights to own it, organisations hold large quantities of valuable data about individuals which isn’t intellectual property and therefore cannot be owned by anybody.

“Typical examples include personal details, transactional records, and information which an individual or third party has provided an organisation.

“Open data presents the possibility to advance market infrastructure and promote efficiency and member engagement in the superannuation system.”

He says that the window between “open banking” commencing and “open super” being introduced, might be an initial period of opportunity for any superannuation fund which is able to act quickly to enhance member experience and outcomes by integrating banking data in some of the following ways:

• A single view of banking and retirement savings, improved member experience
• Reconciliation of employer contributions with salary payment transactions
• Behavioural analysis of member savings and spending behaviour
• Smart assessment of the lifestyle impact of any retirement income replacement shortfall

“It will be vital for superannuation funds, and other financial services organisations, to ensure that data quality is actively managed, if members are to have the key to access it.

“Data quality issues will be more visible to members, and potentially present a risk to reputation if member data quality isn’t good enough,” Mr Steffanoni says.

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