Super performance tests increase the value of advice
The “blunt” nature of the superannuation performance test means the role of financial advisers in educating their clients is becoming more and more important, according to Vision Super.
Speaking at a FINSIA webinar, Emma Robertson, Vision Super head of investment operations, said her superfund had been conflicted by their continual repetition of the phrase “past performance is no guarantee of future performance” and a “blunt” performance test based entirely on past performance.
“So, we do need an education and advice piece around understanding how members can properly assess the capabilities of the funds and compare it,” said Robertson.
She said the superannuation industry needed education, robust and transparent data and independent advice.
But one of the challenges facing super at them moment, Robertson said, was that it was difficult to source “truly independent advice”.
Kristian Fok, CBUS Super chief investment officer, said the performance test had a ‘perverse’ effect in that it promoted short term decision making even though products were assessed over an eight-year time horizon.
“So, you can do the maths, and if you happen to have a really strong period that rolls off, you know what you have to achieve, for instance, if you're on the edge,” he said.
“I think if you've had consistent… performance year by year, and you've got a margin, then you're probably going to think about things a bit differently.
“So, you're going to have these sort of haves and have nots in terms of the ability to execute.”
Georgie Dudley, JANA head of business strategy and innovation, added that the need to hold the industry to account, highlighted by the performance test, should be balanced with the effect it had on members.
“One of the things that we do find a bit challenging with the framework is that it puts a lot of pressure back on a member to then try and look at ‘well is the forward-looking potential performance of a fund consistent with that historical analysis?’,” Dudley said.
“Ultimately past performance is no guide to future performance, we can all agree to that, but I think at the same time, we can’t completely throw that out the window in terms of saying we don’t care about performance because as an industry I think we have to hold ourselves to a higher bar.”
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