As I mentioned in last week’s blog on the recent Intersekt conference, there was an interesting panel discussion on Superannuation – interesting not just because of the topic, but also because it was about the only session I attended at the conference where there was some real disagreement among the speakers. Just goes to show how sensitive and contentious Super has become – and this was not even a discussion about the Royal Commission!
The protagonists were Jon Holloway (Zuper), Carla Harris (Longevity App), Peter Stanhope (GIG Super) and Greg Einfeld (Plenty Wealth).
With around $2.7tn in assets under management, we were told that the Australian model for state-sponsored, privately funded retirement planning is the envy of the world. Yet we also heard that it has been so badly executed at home that we are in the midst of a huge shift in our attitudes towards this defined contribution scheme. And this is not just about disruption or technology – there are serious concerns that many Australians are not willing and/or able to set aside enough assets to provide for their retirement living; that the system is being rorted via skewed tax rules, gender-based wage disparity and expensive management fees; and that there is an overall lack of investor education, interest and engagement.
But for context, and in Super’s defence, the system has helped to make Australians a lot wealthier (along with property), and rank higher than Switzerland for median wealth. And as The Economist recently reported, for good or for bad, Super means that Australia does not have as heavy a state pension cost as most of the OECD.
Some of the issues facing the industry, as outlined by the panel include:
- the changing definition of “ordinary Australians” (who are they? how is this even defined?)
- the changing nature of work (the gig economy etc.)
- the need for Open Super Data (to make choice and switching easier)
- redefining “retirement” (given we are living longer beyond the traditional working age)
- addressing gender imbalance in wages and contributions
- redundant marketing imagery used by much of the Super industry
- why the audience is under-educated and under-engaged on this topic
- too little industry competition (although the regulator APRA is known to favour consolidation of smaller funds which are not sustainable)
- the advice delivery channel needs to change, as does access to, and choice of, products and providers
- the technical infrastructure is not fit for purpose for things like custody and administration (still living in the 80s?)
- tax planning (a key rationale for how super is managed is determined by tax minimization)
- generational change (linked to changing work patterns)
The panel discussion was followed by a fireside chat between Kerr Neilson of Platinum Asset Management, and Simon Cant of Reinventure. According to Mr Neilson, the key structural changes facing the industry are a direct result of financial planning advice becoming less profitable: no more trailing commissions (probably a good thing?); fewer advisors in the market (due to increased professional education requirements) with a resulting shift to accountants; and even robo-advice is not truly scalable. Meanwhile, for anyone watching their Super balance and returns, beware the Trump knock-on effects of trade tariffs and interest rates – this will require greater asset diversification, and robust currency risk management, to take advantage of new investment opportunities.
Next week: What they should teach at school