By Sam Wallis-Smith
The Hayne royal commission has highlighted a litany of problems within the superannuation industry which have conspired to keep costs up and undermine confidence:
- Vested interests
- Lack of effective competition
- Complex regulation
- Poor supervision
- Constant legislative changes
- Consumer complacency
As a financial planner specialising in retirement planning, I rely on superannuation as a key investment vehicle to help clients build wealth, minimise tax, and provide income in retirement. Despite the constant shifting of the goal posts, super remains the best available structure for investors to build their nest egg, and the concessions available in retirement are particularly attractive.
But our biggest complaint with super hasn’t changed in years. And it’s pretty simple – cost.
The truth is there is no shortage of competition in super, with hundreds of funds, and thousands of investment options to choose from. But competition has limited impact on cost if consumers are not engaged. And let’s face it, most people take little interest in an investment that they can’t touch until they’re 60.
It’s made worse by being taken out of our hands…you don’t even need to pick your own fund, your employer will do it for you! Imagine if your employer chose the bank account that your salary went into.
So now for the good news
It appears the Hayne commission is already beginning to have the required effect on the superannuation industry, with major players BT and AMP announcing substantial fee reductions and further announcements in the making.
The royal commission has set fear into the hearts of many super executives, and has jolted super members to begin voting with their feet, pushing funds to improve their offer or risk losing more business.
Further regulatory changes are inevitable, and with renewed consumer confidence, we remain hopeful that the superannuation industry can live up to its immense potential.