Time for funds to innovate
The Australian superannuation industry eagerly awaits details of the new Liberal government's direction on super policy. After a marathon effort by the previous Labor Government to rewrite the rules governing default super and an equally ambitious game-plan to transform compensation for financial advice, the default industry mood in recent years is one of exhausted resignation.
Super fund innovation budgets have certainly been exhausted by a Government dedicated to grasping the levers of innovation in the sector … and not moving over. Government policy innovation has effectively ‘squeezed out’ super funds’ own innovation efforts.
I don’t question the need for government to play a significant role in superannuation policy design. Super policy is vitally important to the national interest and the industry has a lot to be grateful for in the government’s past record of innovation. However, the government also needs to appreciate that super is a ‘joint effort’ – a combination of public policy and private provision. Government and the funds each have much to contribute in terms of innovation to create real benefits for members.
It will take years to know whether the costs of StrongerSuper are justified by the benefits. There are reasons to be optimistic and an equal number of reasons to be skeptical.
Can (largely) rebadging existing default options as MySuper, and constraining them to look increasingly alike, increase competition enough to force price declines adequate to compensate for the implementation costs and the homogenization of investment programs?
It’s clear to me that there’s been a huge, but largely hidden, opportunity cost in squeezing out the innovation activities of the super funds, which are closest to their members and are driven to improve services by the need and desire to survive. There’s a strong case that allowing diverse competitors to innovate is likely to produce better results than a single set of government policies.
Perhaps now, with a new Government and the StrongerSuper and FOFA reforms well developed, the funds can turn back to their own efforts to innovate for members. Or will this Government also feel the need to drive the super train? To feel that surge of power that comes from holding on to the levers of policy power?
I hope not. There’s a lot for the super industry to do to serve members better. We live in an age when evolving technology is enabling new ways of thinking about the provision of retirement services. However, even a cursory view of how super funds communicate with and manage relationships with members suggests Australia has fallen behind global best practice and consumer expectations. There are many opportunities to innovate for members. Let’s hope the new government lets us get on with it.