Regardless of which party next changes super, the government has identified that the ongoing problem with super has not been fixed by previously introduced measures.
Arguably it is time to question why they keep trying to fix the problem, when direct government intervention has failed to mend what is broken so many times before?
When on a long journey, I often asked my Dad “Are we there yet Dad?” and he always said “Nearly Son”. Unfortunately, with an asset worth close to $3 trillion, the prize is ever more attractive to more and more parties and not least of whom, the government.
The argument would be that the financial services market is not held accountable for the delivery of value to the individual account holder. They might say that it’s because it would require far too many people to deliver individual advice to each and every worker and so it has been a long and tortuous journey for every worker who tried to find out what to do with their super over the years to optimise the value being delivered.
The journey becomes particularly hard when you don’t know what road you are on and what destination you have in mind and on top of that someone keeps changing the rules.
Disturbing the Status Quo
Australia has a monumental asset in personal super and every individual should be concerned about any move by government to take direct charge of any part of the asset.
Current public perception is that investment returns are much better if you have your super with an industry fund than one of the master trusts and then current attitude among employers is that their obligation is over when they have paid the mandatory quarterly contribution to all their employee’s personal accounts.
The problem with super in Australia is not systemic, and yet we keep tinkering with the system. The problem is the gap in the marketplace for a service that presents which product or service model are superior to another. Such a service is often created by normal market forces where there are established players with different propositions but no way to determine the value presented. Such a service would certainly disturb the status quo.
The Power of Technology
There is not enough space in one publication to debate how capital is spent on technology around super. So I recommend you use this link to listen to some people with a depth of knowledge around industry practices and sales propositions.
Within super, most of the spend on technology has been centred on product. Essentially spend has been on developing and maintaining a product provider’s capability to maintain an accurate record of an individual’s balance. Spend on maintaining a product is at the expense of investing in providing an individualised service to every account holder based upon personal scaled advice in optimising each person’s account balance.
The MySuper Investment Default
When introduced, this was expected to change everything, mainly because it was “commission free”. Unfortunately the focus in providing a MySuper license to product providers should have been on investment returns and not solely an exclusion of adviser fees. We do not all drive the same cars for a reason. It is usually referred to as performance.
There are two base service models within the private sector for corporate super. One is the master trusts, traditionally bank owned, and the other is the industry funds. One boasts of lower fees and higher returns while the other sells their proposition to market based on a level of servicing that does not exist.
The real difference between the two models should be in their investment choice menus with one focusing on a one size fits most approach and the other presenting, in theory, a quality investment choice menu you can choose from.
All product providers in the corporate super market sell a product and never an optimised individual service. All existing product providers within the corporate super market should be examined by employers who know what they want for their employees. Very few employers, if any, make a definitive service demand on their product provider until they are dissatisfied with that service provider and then they change to a different label with the same problem.
Some employers are beginning to understand their capability to control the performance of their service provider around super and what is best for them. All employers need to examine super as one of the most significant remuneration benefits at their disposal in their attempt to persuade their employees that they are indeed the employer of choice. Examining super is surely a win-win for every employer.