The Future of Super

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!

L to R: Peter Stanhope, Carla Harris, Greg Einfeld, Jon Holloway. Moderator Erin Taylor. (Photo sourced from Facebook)

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

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It’s two months since my father passed away, and nearly a year to the day since he went into hospital for scheduled heart surgery. Sadly, although the operation itself appears to have been a success, the ordeal seemed to trigger a whole series of complications and underlying conditions: within 6 months he was admitted to a dementia ward, and by late last year, he was in a nursing home undergoing palliative care. Less than three months later, he passed away, the shadow of his former self.

I was able to spend several weeks back in the UK over Christmas and New Year, visiting him up to three times a day. Most of the time, he was living in his own little world, and I would simply sit with him and listen to some of his favourite music, mainly baroque and opera. But in his lucid moments there were flashbacks to the distant past, and some recollections of more recent memories. On one occasion, even though he had lost most of his capacity for speech, he did manage a sage piece of advice: “Don’t play with fire”.

More recently, I was in the UK again to scatter his ashes and help sort out his study and his workshop. Memories of impromptu DIY lessons came flooding back. There were also several quirks and surprises in his personal archive: photos of him at management conferences in the 1970s and 1980s, a scrapbook of his time in Germany in the late 1950s during National Service (including some chilling images of Belsen), and a spreadsheet showing his annual income and income tax right up to his retirement.

Although he was fortunate in being able to take early retirement in his late 50s, he spent the next 25 years volunteering, building a portfolio of interests and serving on multiple committees for the arts, small business, veteran affairs, U3A and other community projects. My mother likes to joke that he’d rather chair a committee than mow the lawn. He also continued to learn, and I found recent certificates of proficiency for speaking German, and for formatting Word documents (very handy for writing up agendas and minutes).

He was the product of a classic liberal education, not a polymath, but possessing a solid knowledge about lots of different things: the arts, politics, language and history as well as science and technology. All the things you need to solve The Times crossword.

There are probably three key things that my father taught me:

  • Think for yourself
  • Don’t follow the herd
  • And of course, being an engineer, don’t take something apart unless you know how to put it back together again.

The latter is particularly useful when working with clients on their business reviews!

Next week: Music Streaming Comes of Age