trustee strategic plan fy18 to fy20 - royal commission

Oasis Fund Management Limited Trustee Strategic Plan

Oasis Fund Management Limited

Trustee Strategic Plan

FY18 to FY20 Year ending 30 September

December 2017

Document Status: Restricted

ANZ.800.808.0002

ANZ.800.808.0003


Table of Contents

1. Executive Sum ma ry ................................................................................... 3

1.1 Purpose of the Trustee Strategic Plan ................................................. 3

1.2 Monitoring and Review ...................................................................... 4

1.3 Funding and Resourcing .................................................................... 4

2. Background ............................................................................................... 4

2.1 OFM's Business Dealings and Structure ............................................... 4

2.2 The Funds for which OFM acts as RSE Licensee .................................... 5

3. Business Context ....................................................................................... 6

3.1 Externa l Environment Changes .......................................................... 6

3.2 Regu latory Environment .................................................................... 7

3.3 Existing Internal Environment ............................................................ 8

3.4 Administration ................................................................................. 8

3. 5 Review of Outsou reed Service Providers .............................................. 8

4. High Level Business Strategies .................................................................. 9

4 .1 P&I Strategic Pr iorit ies ...................................................................... 9

4 .2 OFM Strategic Priorit ies ................................................................... 10

5. Financial Projections ............................................................................... 11

6. Key Risks to Strategic Plan ...................................................................... 12

Document Information and Review

Document Information

Title Oasis Fund Management Limited - Trustee Strategic Plan FY18 t o FY20

Owner Managing Director, Pensions and Investments

Custodian Head of Wrap & SMSF, Pensions and Investments

Approver Oasis Fund Management Limited Board

Last Updated December 2017

Last Board Approval 6 December 2017

Next Review November 2018

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1. Executive Summary This document sets out the FY18 to FY20 Strategic Plan for Oasis Fund Management Limited (OFM) as Investor Directed Portfolio Service (IDPS) operator, and superannuation trustee of the Oasis Superannuation Master Trust (the ‘Fund’).

OFM is incorporated and domiciled in Australia and is a wholly owned subsidiary of ANZ Wealth Australia Limited (Wealth Australia), which in turn is a wholly owned subsidiary of ANZ Banking Group Limited (ANZ BGL).

The primary objective of OFM is the management of the funds under its trusteeship in accordance with its Trust Deed, IDPS contract, ASIC Class Order 13/763, and current Australian Law, and to act in the best interests of members of the Fund as a whole.

OFM currently operates within the Pensions & Investments (P&I) business unit of Wealth Australia, which provides customers with superannuation, investment, insurance and advice solutions.

The P&I business unit manages superannuation and IDPS products issued by related entities OnePath Custodians Pty Limited (OPC) and Oasis Fund Management Limited (OFM), and managed investment schemes issued by OnePath Funds Management Limited (OPFM). P&I are also responsible for a small number of products issued by OnePath Life Limited (OPL), and the business unit includes ANZ Share Investing which provides online broking services and integrated margin lending to retail clients and intermediaries, as well as white labelling and execution services. ANZ Share Investing is in the process of being outsourced to CMC Markets by September 2018.

Following a strategic review of the Wealth Australia business, the P&I and advice businesses (excluding ANZ Financial Planning) have been sold to IOOF. The business is working towards an October 2018 completion.

This Strategic Plan is also referred to as the Business Plan in the Trustee’s Risk Management Strategy (RMS) document.

1.1 Purpose of the Trustee Strategic Plan

The purpose of the Strategic Plan is to set out the Trustee’s strategic priorities for the coming 3 years (FY18 to FY20), based on a 30 September year end.

The Strategic Plan is aligned to OFM’s core objective of acting in the best interests of members of the Fund, achieving strong member engagement, and the future growth of the fund. This will be achieved alongside robust compliance, risk management and outsourcing frameworks.

Core areas of focus within OFM’s Strategic Plan include:

• Business Structure

• Business Context

• Strategic

• Financial

• Key Risks

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1.2 Monitoring and Review

The Strategic Plan is approved by the Board each year, generally during the December quarter following completion of the Wealth strategic and operational planning process.

The Strategic Plan is monitored by the Board throughout the year. Progress updates on key activities are tabled to the Board at its quarterly meetings as part of the P&I Managing Director Update.

1.3 Funding and Resourcing

Resources and funding required by OFM to execute its Strategic Plan are currently provided by ANZ BGL as part of Resourcing Deeds in place between group entities. These arrangements will change as the business transitions to IOOF throughout FY18.

The Strategic Plan is funded within the budget for the P&I business unit which is determined each year as part of the operational planning process within ANZ.

A core requirement of the process is to ensure that OFM has sufficient resources – financial, human and technological – to carry out its operations effectively and to execute its Strategic Plan.

Funding and resourcing is monitored by Management on an ongoing basis.

2. Background 2.1 OFM’s Business Dealings and Structure

OFM’s primary business interests are the provision of superannuation, pension and investment products to fund members and investors.

OFM is the Trustee of the Oasis Superannuation Master Trust (OSMT) – Registrable Superannuation Entity (RSE) R1004939.

In this regard, one of OFM’s primary objectives is the management of the funds under its trusteeship in accordance with its Trust Deed and current Australian Law, and to act in the best interests of members of the Fund as a whole.

In addition, OFM is also the Operator of an Investor Directed Portfolio Service (IDPS) offered under the Oasis IDPS and FSP Prestige Plus brand.

OFM holds an Australian Financial Services Licence (AFSL) authorisation by the Australian Securities and Investments Commission (ASIC) in respect of this product offering, but outside of the superannuation environment.

The following table provides a summary of the business operations of OFM:

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Fund Product Grouping Administration Provider

Oasis Superannuation • Superannuation & Rollover Division Macquarie I nvestment Master Trust • Pension Division Management Limited (MI ML)

Bare Trust Oasis (IDPS) Macquarie I nvestment Management Limited (MIML)

Bare Trust FSP Prestige Plus (IDPS) Macquarie I nvestment Management Limited (MIML)

Note : Administration services for the OFM wrap products were transitioned from Oasis Asset Management to Macquarie I nvestment Management Limited (MI ML) on 12 December 2016.

2.2 The Funds for which OFM acts as RSE Licensee

The OSMT is a master trust from wh ich a number of individual badged superannuation and pension sub-plan products are issued. The products issued from the fund include reta il personal superannuation and pension offerings.

The OSMT is used to issue a 'wrap' superannuation offering marketed under its various white labelled sub-plan badges. The product provides customers with access to a wide range of underlying investments including managed funds, ASX listed shares and term deposits.

OFM historicall y appointed Oasis Asset Management (OAM) - a related entity - to perform administration services for the fund . Following the strategic review of the P&I Wrap business in 2015, the administration for the Oasis Wrap products transitioned from OAM to MIML in December 2016.

A new fl agsh ip Wrap product, 'Grow Wrap' was launched by P&I in May 2016 v ia OPC, as Trustee and Operator, and a number of Oasis badges were closed to new business, including Voyage which was previously the fl agsh ip wrap product for Wea lth's Aligned Dealer Groups.

Open market I IFA advisers continue to use their relevant white label badge (open badges). There remain 4 open market badged offerings that are open to new business - Mentor, Wea lthtrac, Dominion and Matrix .

The following diagram provides a summary of the relevant entities, Funds, open and closed badges, and services.

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Diagram 1: OFM Structure

3. Business Context 3.1 External Environment Changes

The Trustee Strategic Plan has been developed in the context of external changes and industry trends that are shaping the current superannuation and financial advice industries.

These external factors include:

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3.2 Regulatory Environment

In 2018 we expect to see a continuation of the high degree of political, legislative and regulatory activity in the banking and financial services industry.

From a legislative perspective, the Government has introduced Bills aimed at improving member outcomes and trustee governance amongst superannuation funds. More broadly, it has also moved to implement the Banking Executive Accountability Regime (BEAR), the new ‘one-stop’ Australian Financial Complaints Authority (AFCA) and the Financial Adviser Standards and Ethics Authority (FASEA).

Within the Parliament, recommendations from inquiries into the Four Major Banks, the Life Insurance Industry, and Consumer Protection in the Banking, Insurance and Financial Sector can be expected. Political scrutiny will remain intense with the Opposition, together with other independents and minor parties, continuing to advocate for the establishment of a Banking Royal Commission.

Policy and regulatory agencies will continue with a significant body of work, including for example, Productivity Commission reviews into Competition in the Financial System (report due July-18) as well as the Competiveness and Efficiency of the Superannuation System (report due June-18). Together with APRA, ASIC will continue its examination of life insurance claims data, as well as claims management surveillance practices, and reviews focussed on both the direct and retail (advisor) life insurance channels. Treasury will also continue to progress policy development on an appropriate regime for retirement income products.

Finally, industry continues to develop and implement its reform agenda, including a comprehensive trustee code of practice by the Insurance in Superannuation Working Group (ISWG) and the ABA Banking Code of Practice, requiring amongst other things, reforms to the distribution of Consumer Credit Insurance (CCI).

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Contains Confidential Information


3.3 Existing Internal Environment

Sale of Pensions & Investments to IOOF

I n October 2017 it was announced to the market that ANZ was selling the Pensions & Investments and Aligned Licensees businesses to IOOF. The agreement includes a 20 year strategic partnership to provide IOOF superannuation and investment products to ANZ customers. The Life Insurance, ANZ Financial Planning and Wealth Connect businesses are not part of this agreement.

The transition of the business is expected to take 12 months, with ANZ supporting certain functions for up to 2 years after that.

The business is currently undertaking the analysis and planning required to transition to IOOF, and further detail will be known as this progresses throughout FY18.

This will be subject to Trustee and Regulatory approval and satisfaction of other conditions precedent.

3.4 Administration

Administration for Oasis Wrap products is outsourced to Macquarie Investment Management Limited (MIML). The Administration Services Agreement (ASA) with MIML commenced on 12 December 2015 and continues for a minimum term of Confidential

The Wrap Product team is responsible for the oversight and management of the outsource relationship with MIML. The relationship is monitored through regular reporting, forums and committees including:

• A weekly Product & Operational Forum attended by key product and operational representatives

• Monthly Service Level reporting provided by MIML to ANZ Wealth • A quarterly Risk and Compliance Forums attended by key product and compliance

representatives • A quarterly Executive Committee attended by MIML and ANZ Wealth senior management.

The OFM Board is provided with a report on MIML's adherence to the service levels within the ASA, incidents, breaches and complaints on a quarterly basis.

3.5 Review of Outsourced Service Providers

A key Trustee responsibility includes the ongoing review and monitoring of outsourced service providers, including those provided by internal related parties.

In addition to the administration arrangement referred to above, OFM also has material outsource arrangement with Bond Street Custodian Limited (BSCL) for the provision of custody services. BSCL is a Macquarie Group company.

OFM maintains a separate agreement with BSCL for custody services. This relationship is managed by the ANZ Wealth Finance team.

To give the Board increased oversight and consistency in the reporting provided by outsourced service providers, an annual review of service providers is held in November.

This review allows the Board to assess performance against key performance indicators (as contractually agreed) and, where there are exceptions, what actions are planned or have been

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undertaken to rectify. Management also provides their perspective on the services received and any key matters for the Board’s attention.

4. High Level Business Strategies 4.1 P&I Strategic Priorities

The OFM Trustee Strategic Plan is closely aligned to that of Wealth Australia and P&I.

Following the announcement of the sale of P&I to IOOF, the businesses will need to work together on determining the long-term strategic direction of the business, in partnership with ANZ Wealth.

P&I has a long history of working with both customers and advisers and their clients, to help Australians protect and grow their wealth. This will continue under new ownership.

The focus remains on our customers and advisers, and the continuation of the P&I Strategic Plan.

Wealth Australia - FY18 Strategic Plan FY18 – FY20

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Pensions & Investments - FY18 Strategic Plan FY18 - FY20

The Key Priorities for FY18 are :

0 Engage with our Customers and Staff • Launch CVP to

members I advisers • Improve member &

staff engagement

0 Change Delivery Model • Develop and

implement new change delivery model

4.2 OFM Strate gic Priorities

0 Smart Choice Sustainability • Distribution strategy • Insurance refresh • Invest ments review • Refresh enhancements • Activation I retention

0 Well Managed & Compliant • Manage Regulatory

Change • Respond to

heightened regulator scrutiny & commun ity expectations

e Adviser Win back • Continued Frontier

investment • Grow Wrap

Win back • Adviser dist ribution

& service model

0 Simplification • Employer legacy

product consolidation & decommissioning

• ANZ Share Investing Completion

• IOOF Separation & Completion

The follow ing are the key strateg ic priorit ies for OFM for FY18-FY20. Managem ent cont inuously look for ways to m ake member comm unications better, simpler and more transparent .

Strategic Board Focus Area Init iative FY18 FY18 FY20

Prio rit ies

IOOF Compliance I Member Oversight & approval of separation Tra ns itio n I Operational activities v' v' v'

Regulatory I Implement key regulatory change Compliance reforms with MIML, includ ing:

• 2017 federa l budget changes to superannuation v' v' v'

Com ply with • Fee disclosure changes (RG97)

Regulat ory • Insurance in Super • Superannuation Governance and

Change Member Outcomes reforms Regulatory I Continue to assess and implement the Compliance outcomes of the Financial System

Inquiry in conjunction with industry and v' v' v'

Government Plat form and Strategic Implementation of agreed product Product enhancements in conjunction with v' v' v'

Enha ncements MI ML. Simplify the Strategic Continue to simplify closed wrap Business badges v' v' v'

Investment Actively monitor investment performance and provide investment

v' v' v'

Ret ain & Grow options to meet members objectives

Market Share Strategic Retain and grow existing badges post

transition to MIML and maximise the v' v' v'

benefits offered by the new platform

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Contains Confidential Information ANZ.800.808.0012

5. Financial Projections

sis Fund Management Limited Trustee Strategic Plan

Key Assumption for Financial Projections

Please note that all financial projections are based on current state and do not incorporate the impact of the transition to IOOF from the beginning of FY19 onwards. These impacts are currently being worked on, and OFM will not bear the expenses related to the IOOF transition.

Financials FY17 - FY20

$m Re v enue

FY17A FY18P FY19P FY20P

Expen se s


NPAT


$m I nflows


EOP FUM $b

FY17A FY18P FY19P

Key Assumptions

Future State • 3 year projections based on current state - no assumed changes

from IOOF transition • Previous management fee agreement with OAM ceased in FYl 7.

Revenue, net of adviser remuneration, to remain within OFM

Market Growth • Market growth of emauu Inflows/Sales Growth • Based on Distribution (sales and advice teams) estimates • Current net outflow experience expected to continue over the

planning period given previous closure of Voyage/FSP badges to new business

Revenue / Pricing Changes • No product pricing changes over next 3 years

Expenses • No change in the MIML Admin fee rate • Expense reduction due to full year impact of MIML outsourcing

arrangement from FY18 onwards • Expenses consist of cost allocations from related ANZ Wealth

entities and cover the cost of MIML administration fees and cost allocations for services provided by Wealth/ANZ functions

OFM Financial Projections - FY18-FY20

Performance Drivers FY17 - FY20

Outflows Ne tflows

FY17A FY18P FY19P FY20P FY17A FY18P FY19P FY20P

Average FUM $b

FY20P FY17A FY18P FY19P FY20P

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6. Key Risks to Strategic Plan

The key risks relating to OFM are out lined in detail in the Trustee's Risk Management Strategy (RMS) .

The following are the strategic risks which need to be managed as part of the execution of t he Strateg ic Plan .

Risks

Business Planning Failure to set and implement clear business obj ectives and strategy for the Trustee business.

Product com petitiveness and d esign

The risk of inadequate product or platform design, resulting in members receiving sub-optimal benefits, fa ilure to attract new members and potential noncompliance with regulatory requirements.

Adverse cha nges in the external environment. I ncluding : - Changes in the regulatory

landscape negatively impacting OFM;

- Heightened media and regulatory scrutiny, includ ing potential banking enquiry;

- Negative sent iment adversely impacting fund flows.

Strat egy executio n Execution risk relating to OFM's strategic plans and initiatives.

Resource contentio n for BAU / strategy and separ ation activities The risk that separat ion act ivities detract staff from BAU activ ities leading to errors or omissions in BAU activ ity

Key Controls

• The Trustee has in place a business planning process to set and monitor business objectives and strategy.

• The Trustee maintains a Board approved 3 year roll ing strategy.

• Business objectives, strategy and plans are revised outside of the business planning process as required .

• A clear wrap strategy and completed the t ransition to Macquarie

• Ongoing market research and competitor analysis undertaken by Product Managers;

• Quarterly reporting by the MD of P&I to the Board on product st rategy execution, includ ing key statist ics such as FUM and inflows.

• Adherence to the ANZ Product Management Policy, which includes new product requirements and an annual product review;

• Significant product changes I new products must be approved by the Wealth Product Committee (WPC) and presented to the Board.

• Direct participation in consultation process and other lobbying initiatives undertaken by the Government & Regulatory Affairs team in conjunction with the P&I business;

• Engagement with industry bodies and participation in init iatives as appropriate;

• Monitoring of the external environment is undertaken on a regular basis and changes likely to significantly impact the st rategy are reported to the Board .

• Technology infrastructure and support is provided by ANZBGL.

• Monitoring of st rategic init iatives by relevant product steering Committees, internal management forums and the Board.

• Separation Joint Business/Transition Plan & Steering Committee oversight

• Monitoring within the business units of impact of redeployed resources.

• Provision of additional cont ract resourcing funded by Project Edison to back fill resource gaps Edison .

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Inherent Risk Ratino

High

High

High

High

High

Residual Risk Ratino

Low

Medium

Medium

Medium

Medium

trustee strategic plan fy18 to fy20 - royal commission

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