The superannuation industry is nothing if not obsessed with abstract nouns, but instead of “engagement” and “adequacy,” the over-arching theme of the 2017 SMSF Association National Conference is one of the most abstract of all – trust.
As Robin Bowerman, head of market strategy and communications at Vanguard Australia, put it in his opening emcee remarks at yesterday’s opening thought leadership breakfast at the Conference, trust is a “powerful but elusive” concept. And in a superannuation system that has suffered from change fatigue, the “elusive” part of that dichotomy has arguably taken precedence of late.
Bowerman argued that the numbers that can be run showing the balance that can be accumulated by a worker entering the workforce today, and paying 9.5 per cent into super over their working life, versus the greater balance that would accrue if just 5 per cent extra contributions were made, represents a “trust dividend” from greater use of the system. But the perennial issues with engagement, lack of trust and understanding of the system among consumers work against this.
Andrea Slattery, outgoing chief executive officer of the SMSF Association, contended that the growth of the SMSF sector indicated that its customers did trust it – the engagement, control and the ability to make the decisions on the super had built that. And after 14 years of Association advocacy, the government now saw the sector as a “well-managed system,” she said.
System-wide, however, there are real issues with trust. Karen Chester, deputy chair of the Productivity Commission, said the stark finding from the Murray Review was that the super system was neither operationally efficient nor competitive enough: from that starting point, the Commission had identified five “system-level” objectives for superannuation, specific to competition and efficiency and revolving around the best interests of members.
These include maximising long-term net returns, meeting member needs, providing value-for-money insurance and improving efficiency over time. “If the system is meeting those, it will have earned the trust of members,” said Chester.
Helen Rowell, deputy chair of the Australian Prudential Regulation Authority (APRA), pointed out that the biggest challenge for the system was changing demographics of its members: as the super system moved toward drawdown, its members’ expectations were changing, and the industry’s ability to “match expectations to a reasonable degree” was going to be just as important as the outcomes it delivered, she said.
While technology was changing the industry at a great rate, it was not a panacea – and was actually just as capable of being a negative, said Peter Williams, chief edge officer at Deloitte Australia’s Centre for the Edge. “Technology can enable trust, if you use clients’ data in their interests, but it can be misused, such as using clients’ data to sell to them. But technology can be used to engage people, and you can ‘scale trust’ through technology,” he said.
Ultimately, technology – while a wonderful tool – will not be enough on its own, said Slattery. “As the system moves into drawdown, we believe people will need more help in that transition, even if only at that point,” she said. “They will need human engagement to talk about what’s in their best interests.
“People will always be important, and that’s why we firmly believe in the new educational standards for advisers, which mean that fund members can see that their adviser has been evaluated, accredited and recognised. Then they can take people on the journey. We think that will (further) engender trust,” said Slattery.