Leaders in retail superannuation discussed the role of choice in superannuation and how the sector will continue to meet the needs of members in the final session of the FSC Summit 2019.
By Ben McAlary
Unsurprisingly the themes of competition and choice, as well as consolidation, dominated the panel discussion around the future superannuation environment in Australia.
Geoff Lloyd, CEO, MLC Wealth Group said he wanted the conversation to shift away from the so-called divisions between superannuation funds, to members and their needs.
“Thinking about the future of the industry, I had a Martin Luther King moment. I have a dream that we stop talking about retail versus industry funds and we actually just start to talk about our members, their super and their outcomes. There’s an opportunity now for all of us to deliver best for all Australians, whether we’re in the for-profit or for-purpose sector.
Lloyd said greater competition will bring greater innovation: “I would argue that we haven’t had as much innovation to date as we will see in the next decade.”
Advice was also critical, he said, particularly for the mass market. “This will be through super, whether it’s in the digital form, call centres or the warm bodies of advisers.”
All panellists (and the audience) agreed that it wasn’t a matter of ‘if’ but instead ‘how many’ providers across the board in superannuation – industry, retail and corporate funds - would survive. According to the results of a live audience poll 62% believed that there would be a consolidation of the industry resulting in 25 to 99 super funds left in the industry by 2025.
“We are in the middle of the biggest disruption to not only the retail industry, but to the whole superannuation industry. It’s too early to call, who are going to be the survivors, but the funds that can provide a strong member outcome should have a role to play,” said Melinda Howes, General Manager Superannuation, BT Financial Group.
The regulator was also keen to promote the benefits that a rationalisation of the sector, would have particularly when it came to products.
“Every trustee must have a long hard look at their offering across the range of funds, products and options that they offer and go through a rigorous process of what they are delivering and how they are assessing performance to members.”
“The industry has 44,000 investment options…on what planet does that make sense? Those options can’t be delivering value for the members that are in them.”
“At the end of the day, we (APRA) would expect to see trustees making the right judgments with their members in mind which will lead to changes, industry consolidation at all levels. Innovation is great but it needs to be sensible and considered innovation,” said Helen Rowell, Deputy Chair, APRA.
The issue of conflicts management was raised by the Royal Commission as something the industry had to do a better job of and panellist Stephen Asplin, Division Director, Head of Platform Product, Macquarie Bank provided some insight on the way forward.
“Conflicts of interest, and the potential for conflicts lie right across the spectrum of super. The key to managing conflicts is to identify and manage them early. We (Macquarie Bank) manage this through a strong trustee board that is made up of all independent directors, which is key to our business. “Directors are supported by a robust framework of policy and procedures, particularly around related party service arrangements. While there are potential conflicts, around a related party service agreement those arrangements can provide a cost effective solution to members, but the key is to ensure they are properly managed.”
The final word of the session came from the regulator, who when asked by moderator Linda Elkins, National Sector Leader for Asset and Wealth Management, KPMG, had strong words for the industry and the direction needed in the immediate future.
“This is a pivot point for the industry, where it can either step up and move forward, or it can continue muddling around and not make any progress. The onus is on industry to identify problems and then think about what solutions they can address to tackle the problems. The more the industry is on the front foot and can demonstrate its intent to improve the outcomes of members, the more likely it will rebuild trust with all stakeholders and deliver what super is here for,” added Rowell.