Super members believe de-risk misconception

26 May 2020

There is a misconception that superannuation funds automatically de-risk to protect members from potential losses during a downturn and funds need to enable members to adopt more individual, goals-based strategies, according to Russell Investments. 

A Russell Investments survey found two-thirds of super members believed this misconception and another 37% believed their fund already managed their investments based on their own personal circumstances even if they did not actively choose how their super was invested within their fund. 

The research also found that only one-in-five people correctly identified asset allocation as one of the most important determinants in achieving adequate super savings for retirement – showing a lack of connection between how super is invested and retirement outcomes. 

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Russell Investments in Australia managing director, Jodie Hampshire, said enabling members to adopt more individual, goals-based investment strategies was an emerging path for global retirement plans to help members better manage their investment choices through inevitable market cycles. 

“For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy,” she said. 

“Therefore, having the right asset allocation at the right time is critical – members who don’t take on enough risk when they are able to could see their super balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.” 

She noted that asset allocation was often overlooked in industry discussions around retirement income adequacy compared to other considerations such as fees, which had a smaller influence on retirement outcomes.  

“Our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choice at all. This is particularly the case in times of severe market uncertainty where strong emotions and behavioural biases have a heavy hand in decision-making,” she said. 

The survey also found that: 

  • 67% of those surveyed did not know how their super was invested or left it to their fund’s default approach; 
  • More than one-in-five (21%) did not know they could choose their investments in super; 
  • Those who have made an active investment choice are significantly more likely to have also set a goal for the amount of super they want to save for (or spend in) retirement; 
  • For those who have made an active investment choice within their super:  
  • Only 30% believe they have the right investment experience to pick their own investments; and 
  • Meanwhile, 28% still pick their own investments, despite admitting they don’t have much investment experience.  
  • When making their investment choices, one in four rely on help from a friend or relative with financial knowledge (25%). Meanwhile, only 30% said they referenced information from their super fund. 


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If this information does not immediately support the push for affordable, personal financial advice delivered by financial advisers who can assist in educating their clients and managing their financial objectives, then nothing does.
The problem is that financial advice is becoming completely unaffordable due to massive compliance requirements and duplication on a scale that precludes a cost efficient service to be delivered to the consumer.
Fix the ridiculous and onerous replication issues so advisers are able to talk to as many people as possible and manageable to ensure a significant increase in the reach to consumers thereby enhancing their knowledge and their confidence in making important financial decisions.

I think this article says that Super funds have mislead their members. If a 2/3rds of my clients misunderstood my advice I would consider that I made a systemic failure and have to issue a breach report to ASIC....

This unfortunately is also a reflection of the lack of attention that many, many people provide toward their retirement savings.
To many, it is just a bucket of inaccessible funds (until recently!) and because time frames are a long time into the future, it becomes an intangible item.
It is the same concept attached to the purchase and maintenance of insurance cover.
The benefit is intangible until something happens, but when nothing happens, the value of the insurance starts to become less important and less relevant.
The human brain often doesn't attribute value to either something too far into the future or something that is not seen or felt (intangible).

Imagine if there were a workforce of 20,000 professionals ready and willing to give personal, affordable advice. Yet, here we are as a living experiment as to how red-tape can kill a whole industry.

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