Everyone Has An Opinion
Super in Australia is a huge asset for the nation, our system is the envy of the world. Unfortunately that also means super gets lots of attention from the government, regulators, banks, unions and the financial services industry as a whole.
Those who shout the loudest about an issue or topic will have their own specific agenda, and often their interests won’t necessarily line up with yours. If anything, the last individuals to be considered by all the parties involved in legislating, regulating and servicing super are you, the individuals who own the asset!
In many cases this has led to the market messaging around super being biased, it often misinforms rather than educates the public about the asset that they own and leads to the wrong guidance on making super decisions.
The Super Situation
The Australian super market has been dominated for far too long by organisations that focus on products, rather than personal service. Making good super decisions is rather complicated and requires a lot of product knowledge. Getting the most out of super requires a level of expertise that most people don’t have, but product providers are reluctant to help!
The most common-place marketing campaign for the super industry involves super providers telling customers how much they care, or promoting low costs and/or higher returns without any transparency about what that really means, this makes the decision making process complicated.
Whilst there are huge variations in product functionality, there is very little variation in most product provider’s intent to deliver a quality service on a personal level.
What’s Wrong With Super?
Put simply the biggest problem with super is:
The government and regulator have repeatedly tried to resolve an apparent problem with super, but the issues have never accurately identified and still exist.
There are far too many third-parties with a vested interest in promoting only themselves.
The idea that the only investment strategy that is available is the “trustee approved MySuper investment default”.
The level of undisclosed costs and related party transactions within a product.
Misinformation by the media where they reinforce the idea that the only way to make a decision is to evaluate the differences in product by looking at the annual disclosure of best investment returns and then the “dud funds”.
The lack of attention paid to investment risk and valuation methodologies when promoting annual investment performance.
Some product providers actually lack scale from an investment management point of view.
It appears that regulatory pressures are depressing all product providers into the same standard model which is based upon a minimum of personal service at an individual account level.
What To Do About YOUR Super?
Well first things first, it is always important to investigate and try to improve your super.
Super decisions are often left for over a decade as you start with very little and then over a decade later you realise you actually have accumulated more than you imagined. So start now and look for a source of information that provides perspective around how you are currently organised.
You may be someone with multiple accounts but then you are uncertain in making a decision about which account to consolidate everything into. Most advisers are product biased and you have to make sure your source of information is technically competent and will not hesitate to recommend whatever choice might be right for you.
You might feel somewhat uneducated about your super. Information provides the education you might feel you lack now. Such information must be mathematically based and must consider a wide array of product choices you could make.
You must be able to browse before you have to buy. Whatever the source, you would never buy blind but maybe that’s why super is such a confusing area to navigate. You need some information early and maybe a bit more and more to be convinced that you are being guided in your best interests.
So Where To Begin?
Let SuperWiser do the hard work for you. It can evaluate your current super fund and compare it against other well-known funds to find the optimal product, contribution and investment strategy for you. It can also help you to establish clear goals so you can easily monitor the performance of your fund.
Start your free Super Review now.
Super History
Compulsory super was introduced in 1992 and at some time, most of us have thought “I could do with the money in my hand” or “I think I can be trusted to use the money in my own best interest”.
Indeed, it took the government and the regulator over 25 years to introduce legislation that said service providers must act in the client’s best interest. One might have thought that such a standard was obvious for 25 years but apparently, it’s never been the case.
The government and the regulator are moving once more to re-regulate bad practises within the financial services industry and, in particular, around super. The government is now boasting they are implementing all the recommendations made by the recent Royal Commission.
Re-regulation has been constantly applied to this sector. Based upon the problems aired by the Royal Commission, however, this seems to have been unsuccessful. If we repeat the same exercise, wont we just get the same result? The Royal Commission identified some very bad errors made by product providers but it may not have identified the underlying problem with super.
So, what is the dominant service model that is currently being applied in servicing super as an individual asset?
The Dominant Super Service Model
The financial services industry does have a standard service model prevalent across all super product providers. Every product sounds like they are promising service, which they are. However, they are not actually promising you an individual service to optimise your super.
Products are only promising what is commonly known as general advice which means doing nothing to help you optimise your super. Let’s simply define general advice as meaning general information.
Super products are well aware of the challenges of providing the public with information that indicates they might not be your first choice if you knew what they know; or if you understood what their advertising truly means as opposed to what it tries to imply. All products provide a service in recording your balances, with a one size fits many approach in terms of how you optimise your super.
The components of the one size fits many approach are:
- A standard fee structure without any responsibility to be competitive.
- An uncomfortable feeling that the fees are higher than the product is worth.
- A standard insurance design without any responsibility to make sure premiums are competitive.
- No advice on when to review or cancel your insurance as most people live to spend their asset in retirement.
- No effective promotion on salary sacrifice.
- A standard default investment choice, labelled by the government as MySuper and commission free.
- The product providers appear to feel no responsibility for any underperformance in their default MySuper investment strategy.
- All product providers have investment choice menus which are never used to recommend what would be a much better investment strategy for the individual.
The real problem is that the dominant super service model, as designed by product providers, only offers a standard definition of individual service at a population level. This is very different to personal scaled advice at an individual account level.
Unfortunately, the Royal Commission has not examined the overall super service model closely enough to reset the regulation of super in an effective and individually beneficial manner.
Projected Income In Retirement
Everybody deserves their optimum lifestyle in retirement, and everyone is entitled to know what they are buying, and especially what is not included in the fee.
SuperWiser indicates what improvement you can get by managing your super better, showing you a projection of your retirement income in today’s dollars. It also offers an advice and implementation service for an affordable one-off fee of $220 (inc GST). Try it and confirm for yourself that the benefit in seeking this advice exceeds the cost. I am sure you will be in for quite a surprise.
Get started by completing a free Super Review today.
Can I get Quality Servicing For My Super?
Based upon any examination of super as a personal asset, it is a well-publicised fact about the financial services industry that quality servicing does not exist at an individual super account level.
Product providers within the financial services industry all argue that they deliver an optimised value to their client base. Notably, their servicing is based on a product-based model with a one size fits many approach as far as their promise to deliver high value at an individual account level. Their promises to deliver value are at a population level and most certainly not centred on personal touch at account level.
If you are in a corporate super plan with a corporate adviser attached, it is likely they are a financial planner looking for leads and not set up to service all plan members. If you are in a personal product as advised by a financial planner, you may be getting serviced but you may not know how this compares with other service options. There is however, an alternative servicing model.
Super Service Models
Much of what we do at SuperWiser involves our market knowledge about which service model your super product fits into.
There are distinct differences between service models and each product’s approach in optimising your super balance, and consequently your projected income in retirement. Not all products provide the same value, and consideration must be given to each product’s capability and intention in optimising your individual super asset.
There are variations between service models and products. When considering your own situation, ask yourself the following questions:
Which product might deliver optimised projected income in retirement?
Are my fees high based on product disclosure rate?
What is the functionality of the product and how can it optimise my super?
What is the asset management capability of each product provider?
What are the service touch points for my account?
Am I getting personalised service and good advice?
The SuperWiser Framework
SuperWiser is a new digital service interface developed by Super Simpler Pty Ltd. It has a database of about 40 different products comparing which product could be better for you as an individual and how to best utilise that product.
SuperWiser helps you to establish your super goals and objectives at an individual account level and then helps you get there. It has been developed to deliver personal advice directly to you the individual for an affordable one-off fee of $220 (inc GST). This covers product, contribution, and investment advice, as well as implementation of the advice.
SuperWiser initially gives you the opportunity to examine your current super and how it compares against other well-known super funds. It provides you with a quick indicative comparison between what you are currently doing with your super and what you should be doing with your super.
Assuming that stirs your curiosity, you proceed to a more tailored calculation which confirms that you can indeed do better. And better still, none of this information costs you anything.
You are then given an analysis of the impact different factors such as salary sacrifice, fees etc. can make. Again, you’ll receive all this information before you commit to pay. Once you decide to proceed, the one-off fee of $220 (inc GST) includes product advice, contribution strategy, investment strategy, and then a step by step implementation process.
Active Servicing
I doubt you have heard of the phrase “active servicing” before reading this publication. It’s not a phrase you would associate with the financial services industry. On the other hand, almost every other industry has their service standards, often because of high levels of competition for your business.
All super products have a one size fits many approach to optimising your super. So, during your working life when you are accumulating your super, every product in the market delivers an average level of service as distinct from a superior service at individual account level.
Whether you are 25 or 55 years old and irrespective of your circumstances, every product delivers a bulk standard solution to most of their individual clients. Most products only become interested in an individual account when the balance is high enough that they can sell high priced financial planning services to you.
This model is unsustainable in the medium term as evidence will be presented to prove that paying higher fees to a financial planner actually does not deliver greater value.
The benefit from active servicing involves the individual knowing exactly what decision they should make based on their circumstances at any point in their career. The strategic options to be considered around your super are not that complicated:
Fees.
Insurance premiums.
Level of insurance cover.
Your contribution strategy.
Your investment strategy.
Your nomination of beneficiary.
These factors work together to build your wealth, optimise your super, and ultimately your projected income in retirement.
So, to answer the question ‘Can I get quality servicing for my super?’ I’d say yes. Why not try it for yourself?
Get started by completing a free Super Review.
Your Best Interest?
Super has been around for a very long time but, even after 25 years of change, all the participants involved in regulating and servicing the asset are still saying it needs changing and fixing.
The unions have a magnificent new slogan stating that “the fox is in the henhouse”. How very creative? I suggest there are more foxes in the henhouse than there are chickens! If anyone should be imposing control on super and the service providers involved, it should be the people who fund it.
Super is an employer-funded employee entitlement and it is the second biggest financial benefit provided to employees after salaries and wages. Unfortunately, in spite of the fact that it is in their best interest to motivate their workforce, employers are often the most complicit in the fact that super as an employee benefit is so poorly delivered.
Some people who should have integrity, in other words our legislature (aka the Parliament) would have us believe that super is a community and not a personal asset. The coalition even suggest that they are in the “best position” to fix what they have been trying to establish for 25 years. Indeed all credit to the Labor Party of 1992 that super was created as a compulsory savings scheme. Unfortunately, there is a growing perception that the Government is now most certainly one of the foxes in the henhouse as they secretly contemplate taking possession of the asset.
Then there are the master trusts, all four of the banks plus one or two significant platform providers. They also provide a false service methodology as they deliver little value beyond recording the remnants of the balance after they have milked it through a complicated raft of legitimate cost deductions. It is to the discredit of so many employers that this particular employee benefit is so poorly monitored and subsequently delivered to the people who own the asset, the very people that they are supposedly trying to manage and motivate.
Then you have the champions of working Australia, the unions. Each and every union has an industry fund that they subscribe to. They protest it is others who are in the henhouse but not themselves. Believe that if you are naive enough to think that they are not as bad as all the others who profess to manage this as a worker benefit.
So it is my opinion that it is in the best interests of employers to hold all the service providers involved with super as accountable for delivering the value we should all own. Employers do fund super and they have a core business to run. Yet they inexplicably ignore that their core business would run better if they delivered employee super as the second biggest financial benefit better than they do now.
Harry Burke – Director, Super Simpler
Published in The West Australian – October 2nd, 2017