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Does super need a rethink?

by Matthew Smith | 24 May 2017

When you log into the member portal of your superannuation fund, what do you see? What should you see? #1 Does super need a rethink

It’s a ponderance Paul Bennetts, the 35 year old CEO of Australia’s newest super fund disruptor, Spaceship, leaves hanging in the room during a recent presentation he’s giving to industry professionals and would-be fintech startup founders.

But really, what information and tools should superannuants expect to have at their disposal?

Perhaps the ability to look into a portfolio to know what you’re invested in at any given time?

Maybe some kind of tool providing some kind of rough guide to figure out how much you need to save this year, or over the next three years assuming a certain rate of return?

While these ideas seem simple and indeed intuitive enough, they’ve eluded the superannuation industry to date. This is an industry currently presiding over more than $2.2 trillion worth of savings on behalf of hard-working Australians.

Bennetts’ views on the superannuation industry’s so called “technology problem” was outlined by InFinance recently here.

“The industry has been resistant for years to making superannuation more transparent,” comments Jeremy Cooper, the chairman of retirement income at Challenger and influencer of superannuation policy, whose name is synonymous with the Cooper Review.

Cooper isn’t in any way associated with Spaceship, nor does he want to be seen to be endorsing the new startup super fund that’s targeting tech-savvy millennials.

Cooper is merely an interested observer of the superannuation industry, an industry he believes, like Bennetts, is ripe for disruption.

“I’ve often thought it’s at the customer interface level where the super industry is most vulnerable,” Cooper says, in conversation with InFinance.

“Just imagine, if a Google or one of the other big global tech companies turned up with a user-friendly interface for super and some kind of global investment concept, the industry here would not be able to compete,” Cooper muses.

“A lot of super funds have apps but they’re pretty lame… If someone did it right, something with real value and not just a gimmick, there would be a stampede effect out of the existing funds,” Cooper comments.

Ripe for disruption

While Spaceship has not yet earned the rights to be recognised a disruptive force in superannuation, the “blank sheet of paper” approach Bennetts is taking should be making institutions in the segment feeling somewhat vulnerable.

Spaceship has been widely criticised by incumbents in the industry and in the media for its high fees and for undermining the seriousness of the retirement savings system with its tech-heavy investment approach.

Behind the headlines, though, Bennetts quite rightly points out there are some gaping competitive opportunities within the industry which services the compulsory savings policy started by Paul Keating in 1992.  

“Why are we so disengaged with our super?,” Bennetts asks.

“Why don’t we hear from our super funds? Why are they making these investments on our behalf and why aren’t they communicating with us what’s happening”,” he muses.

“Go home tonight to your superannuation member portal and see if you can work out what’s in your portfolio and try to figure out whether your Aussie allocation is actively or passively managed. Try to understand how insurance works. I’m not sure I’ve figured it out yet,” Bennetts comments.

“We should know what our top five holdings are, what our top 10 holdings are. Because you want to know what the companies are you’re relying on the grow your savings,” he adds.

One size fits all?

Whenever there is a policy change or an inquiry into the superannuation system, the incumbent industry and retail superannuation providers are quick to protect their turf. 

Responses to the Productivity Commission’s calls to create alternative default models are the latest example,
covered by InFinance here recently

The Productivity Commission casts serious doubts over the efficiency and competitiveness of the superannuation industry in its
latest review, the culmination of an 18 month-long inquiry.

“The way super funds are currently run is one size fits all, there’s one way of communicating, one way of investing the assets and one way of talking about it,” Cooper says.

“If you are earning $100,000 this year, you’ll be allocating around $9,500 pre tax to a funds manager at a super fund,” Bennetts notes.

“That’s the same as a car. When people are buying a car, they compare prices, makes and models. Yet every year we’re making a $9,500 a year purchase to a funds manager and there is no conversation. Zero,” Bennetts says.

“That needs to change,” he says.

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