Jeremy Cooper may not be planning wholesale changes to our super system. On the other hand, his comments in an ASFA plenary session suggest he's certainly not entirely buying the industry line that "it ain't broke so don't fix it".
In a wide ranging speech, Jeremy Cooper outlined the potential governance issues facing the industry in 2025, including the potential for a group of four "super" super funds to dominate the landscape, providing direct private equity sources of funding and wielding far greater leverage in their investment decisions. Cooper drew a parallel with Canadian behemoth funds Ontario Teachers and the Canada Pension Fund.
In this brave new world, the superannuation industry "dog" would no longer be wagged by the funds management tail. Cooper shared a possible view that super the system, if re-designed around members' interests, may look significantly different to the possibly funds management-centric structure of the industry today.
He asked if perhaps superannuation trustees are captive to their service providers, and suggested that without greater scale our funds are at a significant disadvantage in bidding for access to global assets.
In a message that made trustees happy, although perhaps didn't deliver joy to fund managers, Cooper suggested "Super funds have to start acting like they are at the top of the food chain", using their power to benefit members.
Other advantages of scale? Lower fees, in-house investment expertise, improved diversification, lower admin costs per unit and better member education.
Tuesday, November 17, 2009
Financial literacy - are we there yet? ASFA Day 2
If financial literacy is "the ability to make informed judgments and effective decision regarding the use and management of money" then 46 per cent of Australians are functionally illiterate and 53 per cent are functionally innumerate, according to Russell's Linda Elkins.
On a panel with Vanguard's Jeremy Duffield and Paul Henderson from The Smith Family, Linda Elkins told ASFA delegates how one in two Australians do not have the skills they need to make informed choices in their interactions with the financial service sector.
Part of the solution is education and access to low-cost, effective, advice.
The Smith Family is doing their bit for national education, with a Financial Literacy Certificate that helps disadvantaged people increase their financial literacy and improve their money management skills.
What can we all do? Paul Henderson suggested delegates should make sure they are aware of the scale of disadvantage, raise the issue inside their own organisations and volunteer to run a financial literacy training course.
Long time BlueChip client Jeremy Duffield asked the audience what their post-GFC learnings were about member communication. The answers were clear: understand and segment the audiences, make information highly relevant, use plain English, and create simple materials speaking at the right level.
And "stop sending regulatory-driven reams of material people don't understand."
Also in the member engagement stream, Andrew Inwood (Brand Management) & James Coyle (Australian Super) made a case for member communication.
Key themes in their presentations included the opportunity to communicate more effectively to members whose attention may have turned to their super thanks to the GFC, the importance of brands - as yet underdeveloped in superannuation - to member engagement, the need to educate members and the rise of social media as a way to talk and engage effectively.
Will this lead to an "uncontrolled debate" online between funds and their members? Not yet, but certainly with members now arguably more interested in their super, there's never been a better time to achieve greater engagement online.
On a panel with Vanguard's Jeremy Duffield and Paul Henderson from The Smith Family, Linda Elkins told ASFA delegates how one in two Australians do not have the skills they need to make informed choices in their interactions with the financial service sector.
Part of the solution is education and access to low-cost, effective, advice.
The Smith Family is doing their bit for national education, with a Financial Literacy Certificate that helps disadvantaged people increase their financial literacy and improve their money management skills.
What can we all do? Paul Henderson suggested delegates should make sure they are aware of the scale of disadvantage, raise the issue inside their own organisations and volunteer to run a financial literacy training course.
Long time BlueChip client Jeremy Duffield asked the audience what their post-GFC learnings were about member communication. The answers were clear: understand and segment the audiences, make information highly relevant, use plain English, and create simple materials speaking at the right level.
And "stop sending regulatory-driven reams of material people don't understand."
Also in the member engagement stream, Andrew Inwood (Brand Management) & James Coyle (Australian Super) made a case for member communication.
Key themes in their presentations included the opportunity to communicate more effectively to members whose attention may have turned to their super thanks to the GFC, the importance of brands - as yet underdeveloped in superannuation - to member engagement, the need to educate members and the rise of social media as a way to talk and engage effectively.
Will this lead to an "uncontrolled debate" online between funds and their members? Not yet, but certainly with members now arguably more interested in their super, there's never been a better time to achieve greater engagement online.
Have we reached peak Super? ASFA Day 2
Ross Greenwood coined the term "peak super" in opening Day Two of the ASFA conference in Melbourne today. The questions he threw as challenges to the panel and the audience included:
"What happens when the money going out (how everyone in the room currently gets paid) is greater than the money coming in?" and "Do we really have a world class retirement savings and income system?"
The short answers from a panel of industry leaders were "no, we haven't reached peak super" and "we can always improve, but yes, we think it is a world class system both for retirement savings and incomes".
Panel members Steve Bracks (United Super / CBUS), Sue Dahn (ESSSuper and AGEST), Michael Dwyer (FSS) and Nicolette Rubinsztein (CFS) also addressed the previous day's comments by Dr David Morgan in relation to superannuation industry reform, the Henry Report and the balance between retail bank deposits and savings inside super.
Panel comments:
On the banks versus super
"Ken Henry is more focused on bank funding than super adequacy."
"Morgan said 'I'm from the bank and I'm here to help you'. You have to worry when the bankers start to offer us with the super system. A trillion dollars attracts a lot of attention."
Is our super system world class?
"The Deloitte fee study & other research about performance relative to other nation's pension funds gives evidence for (the case our system is) world class."
"The Mercer study said we have the best super system bar the Dutch - measured in terms of adequacy, integrity & sustainability."
"Can we do it better? Yes, but the Auspoll research shows 80 per cent of Australians are confident in their super - you don't want to change that."
"We've had the biggest shock to the system in GFC and yet members stayed put."
On media coverage of super
"The super system has had a 'going over' by the media. The easiest point to describe the GFC was to focus on people's retirement investments - media could relate the GFC to the public and bring it back to them. Despite the enormous amount of negative media that started with the GFC, you can see with the Auspoll results that people are still behind and supporting the super system. I defy you to find a piece of public policy with that kind of support in any country."
On legislative risk to super
"Too frequently we've seen super be a political football and source of votes with popular measures put through."
"Political changes have impacted confidence - we know people are not putting any more money in because you keep changing the rules."
And finally, this comment: "The same amount of thought went into the recent budget changes to super that went into the changes to the employee share scheme changes" to spontaneous applause from an audience not given to overreaction.
"What happens when the money going out (how everyone in the room currently gets paid) is greater than the money coming in?" and "Do we really have a world class retirement savings and income system?"
The short answers from a panel of industry leaders were "no, we haven't reached peak super" and "we can always improve, but yes, we think it is a world class system both for retirement savings and incomes".
Panel members Steve Bracks (United Super / CBUS), Sue Dahn (ESSSuper and AGEST), Michael Dwyer (FSS) and Nicolette Rubinsztein (CFS) also addressed the previous day's comments by Dr David Morgan in relation to superannuation industry reform, the Henry Report and the balance between retail bank deposits and savings inside super.
Panel comments:
On the banks versus super
"Ken Henry is more focused on bank funding than super adequacy."
"Morgan said 'I'm from the bank and I'm here to help you'. You have to worry when the bankers start to offer us with the super system. A trillion dollars attracts a lot of attention."
Is our super system world class?
"The Deloitte fee study & other research about performance relative to other nation's pension funds gives evidence for (the case our system is) world class."
"The Mercer study said we have the best super system bar the Dutch - measured in terms of adequacy, integrity & sustainability."
"Can we do it better? Yes, but the Auspoll research shows 80 per cent of Australians are confident in their super - you don't want to change that."
"We've had the biggest shock to the system in GFC and yet members stayed put."
On media coverage of super
"The super system has had a 'going over' by the media. The easiest point to describe the GFC was to focus on people's retirement investments - media could relate the GFC to the public and bring it back to them. Despite the enormous amount of negative media that started with the GFC, you can see with the Auspoll results that people are still behind and supporting the super system. I defy you to find a piece of public policy with that kind of support in any country."
On legislative risk to super
"Too frequently we've seen super be a political football and source of votes with popular measures put through."
"Political changes have impacted confidence - we know people are not putting any more money in because you keep changing the rules."
And finally, this comment: "The same amount of thought went into the recent budget changes to super that went into the changes to the employee share scheme changes" to spontaneous applause from an audience not given to overreaction.
Wednesday, November 11, 2009
Trustees urged to look longer term than the nation's leaders - ASFA Day 1 closing
In closing the day's proceedings, Dr Keith Suter countenanced three scenarios for the future world order - "business as usual", "break-up", "break-down" or "breakthrough".
In the "breakthrough" scenario, Australia is poised to make the most of a world in which both the economy and how we manage scarce resources are reinvented - to see the globe become both economically and environmentally more sustainable.
Speaking directly to those in the industry, Dr Suter argued that politicians in power, subject to the very short-term and immediate pressures of the 24/7 media cycle and electoral expediency, are unlikely to bring about longer term solutions or responses to these scenarios. With politicians focused on the short-term issues that dominate the news cycle, at the expense of future-defining issues, then other decision makers must pay more attention to the less urgent but more important "bigger" issues.
The most dominant of these bigger issues is the start, for good or ill, of a new global economic era.
Against this dramatic backdrop, Dr Suter urged fund trustees to take the longer term, and arguably braver, view. To look beyond existing paradigms to see what is, and what may be, and to plan for a number of very different scenarios.
Against this dramatic backdrop, Dr Suter urged fund trustees to take the longer term, and arguably braver, view. To look beyond existing paradigms to see what is, and what may be, and to plan for a number of very different scenarios.
While the future may not be certain, the obligations of those in the industry are - to safeguard the long-term wealth of Australians.
Carden Calder is attending ASFA 2009 for BlueChip Communication Group. BlueChip is Australia’s leading financial services communication firm. We help “tell your story” through media, online pr, compelling content and other forms of communication - so the people who matter most want to do business with you.
Carden Calder is attending ASFA 2009 for BlueChip Communication Group. BlueChip is Australia’s leading financial services communication firm. We help “tell your story” through media, online pr, compelling content and other forms of communication - so the people who matter most want to do business with you.
Member research - Super? What super? ASFA Day 1
On an individual member level, ASFA research conducted by Auspoll shows what superannuation members really think about it all. And the short answer is they don't really think.
At least they don't think much about their super.
At least they don't think much about their super.
When asked which superannuation issues caught their attention recently, the largest portion of respondents (47 per cent) could not think of any - and answered "none". Only some (29 per cent) offered losses or a decrease in the value of their investment, and a very small number (6 per cent) suggested fees.
Have people changed their investment options in response to market movements? Most (87 per cent) have not.
Which are the two most widely-held funds? Australian Super and AMP, by a considerable margin.
In terms of split between industry and retail, the survey found some 48 per cent were in industry funds, 29 per cent in retail and a far smaller proportion (3 per cent in each) were invested in a corporate or self-managed fund.
It seems members, in the wake of one of the worst years on record for returns, are largely satisfied (79 per cent of respondent) with their super funds - consistent with past findings.
Interestingly, those in the public sector and industry funds show far stronger satisfaction ratings than retail fund members.
Of the small number not happy, why is that? Most said it was about performance and / or fees.
For those who are happy with their fund, it's down to low or reasonable fees, performance and communication.
And finally, what do members looks for in a fund? Performance, reasonable fees, safety or security, and consistency and stability.
Five mega-trends & financial planning - ASFA Day 1
Graham Rich of brillient! and Portfolio Construction Forum spoke in the morning about his pick of the top five mega-trends affecting future portfolio construction outcomes.
The "mega-trends" may sound familiar, and were in fact echoed by other speakers: reformation of regulation, turbo of technology, movement of markets – particularly global emerging markets, the ETA of ESG, and retirement of retirement.
The one thing super funds should be doing over the next five years to respond to these trends?
Provide members with quality financial planning as a core service.
Rich threw out the challenge to trustees to choose just one of the five megatrends and commit to learning about it and collaborating with industry peers.
The "mega-trends" may sound familiar, and were in fact echoed by other speakers: reformation of regulation, turbo of technology, movement of markets – particularly global emerging markets, the ETA of ESG, and retirement of retirement.
The one thing super funds should be doing over the next five years to respond to these trends?
Provide members with quality financial planning as a core service.
Rich threw out the challenge to trustees to choose just one of the five megatrends and commit to learning about it and collaborating with industry peers.
Bank deposits versus super? ASFA Day 1
Dr David Morgan's view of the new global economic era is bank-centric, with both threats and opportunities for the superannuation industry.
The GFC revealed an inherent vulnerability within the local banking system, says Dr Morgan.
This Achilles heel is the low level of retail deposits which in turn leaves our banks dependant on foreign wholesale funding.
It was this foreign wholesale funding market that closed down completely at the height of the GFC. Were it not for the Government lending its AAA rating to local banks, they too would have closed down, says Dr Morgan.
The solution, according to Dr Morgan, involves changing the end destination of national savings – perhaps turning back the trend that has seen superannuation balances grow at the expense of bank deposits.
One potential way to do this is for tax reform to make bank deposits more attractive - and superannuation less attractive.
The GFC revealed an inherent vulnerability within the local banking system, says Dr Morgan.
This Achilles heel is the low level of retail deposits which in turn leaves our banks dependant on foreign wholesale funding.
It was this foreign wholesale funding market that closed down completely at the height of the GFC. Were it not for the Government lending its AAA rating to local banks, they too would have closed down, says Dr Morgan.
The solution, according to Dr Morgan, involves changing the end destination of national savings – perhaps turning back the trend that has seen superannuation balances grow at the expense of bank deposits.
One potential way to do this is for tax reform to make bank deposits more attractive - and superannuation less attractive.
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