Mr David Bryant, head of Australian Unity Investments (AUI), today said that the Cooper Review had focused almost exclusively on fee reductions and entirely ignored the value of, and opportunity for, investor education.
Mr Bryant was presenting at a session “The Cooper Review – A New Dawn?” at the Financial Services Council annual conference in Melbourne today (12 August).
In his presentation, Mr Bryant also called for a slow-down on implementing some components of MySuper.
“Regardless of the government of the day, there are important elements that need to be worked through and we don’t have all the answers – we don’t even have all the information yet. There is more work to be done, let’s do it well.
“While Mr Cooper and I want the same thing – to have a superannuation system that operates in the best interests of members and maximises retirement incomes for Australians – we disagree on how to best achieve that aim.
“The Cooper Review has taken, as its starting point, the assumption that people don’t want to care about their superannuation. It has then focused on the central tenet that improving the cost and competitiveness of the superannuation industry is all that is required to ensure Australians will have enough money to fund their retirement.
“As a result, the Review’s proposals are trying to fix elements of the industry that aren’t broken – cost and competitiveness. We have seen significant rationalisation over the last six years – the number of super funds has decreased by 60 percent – and fees are down from 135 basis points to 112 basis points over a similar timeframe. Clearly, competition is working to improve scale, drive down price, and ultimately improving the quality of the offering as well as delivering innovation.
“What isn’t working, and what MySuper will only discourage, is investor education.
“Research has shown that over three-quarters of Australians are interested in learning more about planning for their long-term future, and a similar number would like to know more about investment*. So education and financial literacy support is in great demand.
“But MySuper will actively disengage people and encourage them not to care, not to try to learn more, and not to participate in saving for their own retirement. We are giving up on the idea of engagement before we have even tried it.
“The Cooper Review is sending the message that paying low fees is all that matters, not quality, engagement or education – when nothing could be further from the truth.
“Australian Unity operates businesses in retirement living, aged care and preventative health, so I am well aware of the consequences of inadequate retirement planning, and what insufficient financial security in retirement looks like. Longevity risk and the escalating cost of care are very real issues faced by retired Australians and for many people, the last three years of their life is often the most expensive.
“The inconvenient truth is that, with our rapidly ageing population, we need people to take responsibility for their financial position. But at a time when it is more important than ever for people to get involved and take an interest, we are mandating the opposite approach and encouraging the wrong behaviour.
“Compulsory MySuper means people must stay in it until retirement unless they opt out. They are also very unlikely to voluntarily add to their super. We are making a whole generation dependent on a paternalistic MySuper.
“We can’t take the risk of getting this wrong. The financial and emotional drain will impact all Australians. The MySuper features of compulsory default, limited investment options, and a focus on cost, should be delayed until an attempt has been made at understanding and addressing education. The long-term implications of encouraging apathy and ignorance can’t be underestimated and can’t be reversed,” Mr Bryant said.
Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider Australian Unity. It has $10.3 billion in funds under management (as at 31 July 2010). Its investment approach is to use its established in-house expertise in property and mortgages while also forming joint ventures and strategic alliances with other organisations with specialist expertise.
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*Australians understanding money (2007), Financial Literacy Foundation, Commonwealth of Australia.
http://www.understandingmoney.gov.au/documents/Australiansunderstandingmoneyweb.pdf
