Minutes - Annual Members' Meeting
Held via live stream on Wednesday 9 December 2020 at 1.00pm
Kirsten Mander, Chair
Andrew Proebstl, Chief Executive (CE)
Norman Zhang, Chief Investment Officer (CIO)
Andrew Boog, Richard Fleming, Richard Flitcroft, Geoff Hone, Carita Kazakoff, Phil Kennon QC, Nikhil Mishra, Anastasia Polites, Imogen Sturni
David Eastwood, Executive Manager, Operations & Member Services
Kaye Wheatley-Brown, Executive Manager, Legal, Risk & Compliance
Carrie Norman, Executive Manager, Member Experience
Dean Waters, Partner, KPMG (external auditor)
1. Meeting open & welcome
1. The Chair announced that a quorum was present online and declared the meeting open at 1.00pm.
2. The Chair welcomed and thanked all those who joined had joined the Annual Members’ Meeting (AMM).
3. The Chair confirmed that notice of the AMM had been given in accordance with the Superannuation Industry (Supervision) Act 1993.
4. The Chair formally acknowledged the traditional custodians of the land on which the meeting was being held and paid respects to their Elders past, present and emerging.
5. The Chair noted that legalsuper’s auditor, Dean Waters from KPMG, was present.
6. The Chair outlined how the AMM would be conducted.
7. The Chair invited members to submit their questions via the online platform.
8. The Chair briefly discussed the events of 2020 and noted:
- It had been an extraordinary year, dominated by the COVID-19 pandemic,
- The pandemic has had a dramatic effect on investment markets, and this has caused anxiety for many members as well as underscoring the need for strong and steady management of the Fund throughout this turbulent period,
- There have been significant changes to the policy and regulatory framework which governs the superannuation sector, bringing into focus the importance of superannuation to the lives of Australians and the Australian economy and the importance of the responsible and ethical management of superannuation, and
- legalsuper has remained focussed on supporting members’ aspirations, keeping members informed and supported.
9. The Chair noted that the AMM will focus on three elements:
- Stability of service and support during COVID-19,
- Investment performance, and
- Corporate governance.
2. 2019/20 in review
10. The Chief Executive addressed the following matters:
- Being a specialised fund focussing on the legal community, and a smaller fund, means legalsuper can be nimble in reacting to markets and accessing niche investment opportunities,
- Key financial outcomes for the year ended 30 June 2020 saw FUM at $4.2bn, total inflows for the financial year of $391m (up 1% on the prior year), 43,088 members and 9,898 employers,
- legalsuper’s MySuper option, where 66% of members have their money invested, returned negative 0.1% for 2019/20, 0.7% higher than the SuperRatings MySuper median return for the 50 largest super funds,
- Over longer timeframes, higher MySuper returns were delivered, 5.9% over 5 years and 7.5% over 10 years to 30 June 2020,
- Members and employers, through research and feedback, have indicated that they highly value personal service, and in response legalsuper’s service model has been designed to meet these expectations. In 2019/20, given the impacts of COVID-19, additional communications were issued to keep members informed of developments and to provide reassurance and answers to questions,
- Additional email communication with members had also taken place to address matters such as market updates, early release of superannuation scheme (ERS) and other government reforms,
- During 2019/20, direct personal contact with members and employers increased by 50%, with around 2,400 meetings with members, 800 meetings with employers, and over 200 workplace seminars and presentations,
- Two new information hubs were added to the website – one for COVID-19 resources and the other for end of financial year support,
- The ERS program saw 2,956 payments to members, in aggregate~$25.7m to 30 June 2020,
- Norman Zhang was appointed Chief Investment Officer in March 2020 and Dr Joe Fernandes was appointed independent investment expert in April 2020,
- legalsuper monitors developments in member and community expectations of institutional investors in terms of environmental, social and governance (ESG) considerations. In support of its ESG Policy, legalsuper transitioned all investments in Australian shares to discrete mandates, so that it can now vote directly in respect of all Australian shares. To assist with this, legalsuper has appointed the Australian Council of Superannuation Investors (ACSI) to provide advice to support proxy voting decisions,
- The high incidence of mental health issues in the legal sector has been widely reported, and legalsuper is seeing an increase in mental health as a causal factor in insured claims for death and TPD, with 25% of all insured claims being due to mental health issues,
- Additional reforms to superannuation were announced in the Federal Government’s budget and the Retirement Income Review has been published,
- legalsuper members are kept apprised of the changes that will impact them and their situation when such changes to occur.
3. Investment strategy update
11. The Chief Investment Officer addressed the following matters:
- 2020 had been a challenging year for investment markets,
- The Chief Investment Officer works with the Investment Committee, Board and external advisers to deliver an investment strategy to maximise the retirement outcomes for members,
- legalsuper has a belief that strong fundamentals deliver good long-term outcomes for members which has resulted in its portfolio being comprised quality investment managers investing in sound investments,
- In addition to these fundamentals, focus is given to what makes legalsuper different, and its smaller size which means it can invest differently, be nimbler when seeking new opportunities or exiting risk, and investing in segments of the markets where larger investors are unable to do so,
- 90% of the fund is actively managed,
- Responsible investment – a highlight was appointment of ACSI as legalsuper’s proxy voting adviser for all Australian shares, and through this, can directly impact the ESG aspects of the companies in which legalsuper invests. ACSI’s efforts in 2020 have focussed on diversity, corporate governance and culture, climate change and workplace issues,
- Looking to the future, there has been a strong start to the 2020/21 with the MySuper option returning 8% from 1 July to 30 November 2020,
- The team continues to closely monitor and manage the portfolio and investigate investment opportunities that 2021 may bring.
4. Governance & Board
12. The Chair addressed the following matters:
- On behalf of the Board, the Chair thanked the management team for its dedication and hard work during a difficult year to support members and manage their retirement savings, particularly working much of it remotely and in Stage 4 lockdown,
- Board members have a deep understanding of, and a commitment to, corporate governance and member expectations and the Board is very aware of the growing expectations of members and the community in relation to ESG issues,
- Ethical corporate culture and business operations and growing expectations from investors regarding how corporations address the issue of climate risk and the expanding choice of investments which demonstrate positive social impact are important items on the ESG agenda at present,
- Members were advised in September 2020, having regard to legalsuper’s position of ESG issues, that the decision to transfer the balanced socially responsible investment option from AMP Capital Ethical Leaders Balanced Fund to Pendal Group’s Sustainable Balanced Fund after careful consideration due to concerns with investment performance and reports of culture within AMP,
- There are strong, responsible governance policies in place at legalsuper around often contentious issues such as remuneration (no bonuses are paid to legalsuper employees), strong fit and proper and avoidance of conflicts of interest criteria for all directors and officers, continuing professional development requirements, firm expenditure controls and strong risk and strategic business planning and member outcome policies and systems.
5. Member questions & answers
13. The Chair noted the meeting will deal firstly with questions submitted prior to the meeting (some of which have already been partially covered in the preceding addresses) and afterwards to questions at the meeting. Where similar questions are received, they will be responded to collectively, and where not practicable to answer in meeting, we have reproduced that question here and provided an answer. legalsuper cannot provide personal, financial or legal advice.
5.1 Questions received prior to the AMM
14. TPD insurance claims
- Over the last 5 years, what is the average length of time taken to finalise TPD claims?
- What is the longest time taken to finalise a TPD claim?
- Is the Board satisfied with this performance?
- What is legalsuper’s approach to outsourcing aspects of claims processing, and does legalsuper incur additional expense and time for each claim?
- Does the Board have a view that members making claims are likely to be bona fide or ‘on the take’?
- The average time taken to finalise a TPD claim is 5.4 months. This compares to the industry average of 5.3 months.
- The longest time taken to finalise a claim was five years, but this was due to the claimant changing legal representation through the claims process, a need for additional and specific medical evidence to be obtained and the member had taken a long time to lodge the claim after the event occurred.
- The Board is supported by the Administration and Insurance Committee, the Insurer and Fund Administrator in the handling of claims. The Committee receives regular updates on claims processing times. In this regard, the Board is satisfied with this performance, but continues to monitor this closely. legalsuper has also adopted the Insurance in Superannuation Voluntary Code of Practice to promote greater accountability and consistency of delivery of claim applications.
- The current model is an outsourced model, and a review of insurance benefit design is currently underway, and when that review is complete, it is the intention to undertake a tender for insurance, and that will provide a timely opportunity to review and form a view on the current outsourced model.
- The eligibility of individuals making claims is based on independent evidence to support the claim. The claims assessment process has steps to ensure that evidence supporting a claim is consistent. The Board does not start with a mindset that claimants are not genuine but relies on the evidence provided.
15. What is the fund's position on climate change and ESG investing generally?
- legalsuper’s investment beliefs are published on its website. They recognise that environmental risk, including climate change, as well as social and governance risk can impact on the financial outcomes of investments.
- ESG factors are very important when portfolios are being designed. Climate change scenarios are modelled, and investment strategy is set having regard to these considerations.
- The ESG process of managers is also considered, and managers appointed have strong ESG credentials and processes.
- 100% of the Australian share portfolio is actively managed by investment managers, and managers can pivot the portfolio away from stocks where the climate change risk may be increasing and towards stocks such as renewables. As a result, there is no significant exposure to companies in Australia mining thermal coal.
- A recent review of the legalsuper portfolio indicated that its carbon footprint is 15% lower than the average Australian superannuation fund.
16. How will Legalsuper navigate the extensive regulatory and legislative changes including Your Future, Your Super?
- The superannuation sector has been the subject of extensive regulatory and legislative changes for many years, so there is an expectation that changes will continue.
- legalsuper will continue to respond to these changes, guided by the Board, its management team and external advisers.
- In relation to Your Future, Your Super, with legalsuper having a clearly defined membership segment, it will continue to benefit from that strong alignment and affinity to the legal sector, without the need to incur significant expenditure on advertising or sponsorship.
17. Many superannuation funds had negative returns in the last financial year. How does legalsuper intend to increase returns over the coming year?
- This was addressed by the Chief Executive and Chief Investment Officer as part of their presentations to the AMM.
- While the MySuper option delivered a negative 0.1% return in the 12 months to 30 June 2020, lower risk options delivered positive returns and risker options delivered slightly more negative returns.
- From 1 July 2020 to 30 November 2020, the MySuper option was delivering a return of 8%, which demonstrates the volatility of the last 12 months.
- To improve future returns, there is a focus in active management in the equities portfolio, the lowering of investment fees across the portfolio and focussing on investing in smaller niche sectors of the market where valuations may not be so high or where there may be a particular differentiator.
18. Would I have been better off investing with another fund, and if so, which fund is the best? Is legalsuper interested in merging with another superannuation fund?
- Responding to questions about investments in different funds would amount to personal advice, which legalsuper is not authorised to provide under its AFSL. The Chair advised the member should consider seeking financial advice from a financial adviser.
- As to mergers, the Board remains open to approaches from any other superannuation funds, and any proposal for merger will be considered carefully to ascertain whether such a merger would be in the best interests of members. legalsuper is not currently involved in any merger discussions.
19. Expenditure on functions, meals and travel for directors
- The Board approves an annual operating budget which includes expenditure on functions for directors. Director’s functions are convened from time to time in the normal course to provide an opportunity for informal engagement with co-directors or where directors retire from office to thank them for their contribution.
- legalsuper’s Expenditure Policy requires that all travel, meals and accommodation expenditure must relate to the proper operation of the fund, be reasonable, prudent and in the best interests of the members, and these requirements are fully abided by the Board.
20. Who appoints the Board and has an independent director been appointed?
- Directors are nominated by legalsuper stakeholders and are appointed subject to the Board being satisfied that the nominee meets the fit and proper test.
- There is one independent director who is appointed by the Board (Kirsten Mander, appointed in November 2017).
- The Board is required by its constitution to appoint an independent director who will serve as Chair of the Board
21. Has legalsuper had bad investments in the past?
- All investors over time make investments which do not live up to expectations.
- By way of example, in 2007 legalsuper invested in a retirement villages group which, as an investment, did not perform well during the global financial crisis.
- The records show that legalsuper has a good investment history, being careful and responsible in managing investment risk. Potential new investment opportunities are subject to legal, operational and tax due diligence. Investment expert advice is also received and considered including from the Chief Investment Officer, independent investment experts and asset consultants.
- Investment risk is monitored closely to identify risks as early as possible and, where necessary, steps will be taken to exit an investment if there is an unacceptable level of risk going forward.
22. Board culture
- All directors have a strong commitment to strong, effective governance, take their responsibilities very seriously and are absolutely focused on strong decision making and the best interests of the members.
- The Board’s culture is strong, with members drawn from across the legal sector. Decisions are based on a consideration of the relevant facts, there is thoughtful probing of the information provided and a commitment to strong, robust discussion to enable the Board to consider all possible options in order to arrive at the best possible decisions.
23. How are questions for the AMM selected and who wrote them?
- All questions received prior to the AMM have now been addressed and were written by the members who submitted them.
5.2 Questions asked at AMM
24. Have many members taken the opportunity to virtually attend today’s AMM?
- As at the time this question was asked, there were 78 attendees.
25. Which would be the best investment option for me?
- Responding to questions about investment options would amount to personal advice, which legalsuper is not authorised to provide under its AFSL. The Chair advised the member should consider seeking financial advice from a financial adviser.
26. What kind of mental issues can a member claim for?
- There is death, TPD and salary continuance cover through OnePath Life.
- Many claims are mental health related. As to specifics as to what members can claim for, further information is available in legalsuper’s Product Disclosure Statement or by receiving a copy of the relevant insurance policy.
5.3 Questions asked at the AMM and answered after the meeting.
27. Does legalsuper have a policy on employing aboriginal people?
- legalsuper has a Diversity Policy which has been approved by the Board and is available on legalsuper’s website. legalsuper believes that diversity is important to support an inclusive and collaborative workplace which values and encourages individual differences to contribute to its success.
28. How does legalsuper’s investment performance over the past 15 years compare to UniSuper, HESTA and Aware Super?
- legalsuper’s net MySuper investment return for 15 years to 30 June 2020 was 6.08%.
29. The government seems to be putting a lot of pressure on funds to merge, what is legalsuper's position?
- This question is answered at point 18 above.
30. Does the board have a position on the increase of the SGC to 12% given that the government may be seeking to freeze the increase due in July 2021?
- The Board notes the increase in the SGC is legislated to occur from 1 July 2021. An increase in the SGC will increase the super savings of members and enhance members’ readiness for retirement.
31. Is there a voluntary contribution amount we can give that the government will match?
- If you are a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution (called a co-contribution) up to a maximum amount of $500. The amount of government co-contribution you receive depends on your income and how much you contribute. Refer to legalsuper’s Product Disclosure Statement or the ATO’s website for further information.
32. There were no further questions.
6. Other business
33. There was no other business.
7. Meeting close
34. On behalf of the Board and management team, the Chair thanked all members for attending the AMM and closed the meeting at 1.41pm.
CONFIRMED: Kirsten Mander, Chair