In the years to come we will look back on the last 12 months as a watershed for the Australian superannuation industry.
It was the year of the ‘Big Five’: the global financial crisis (GFC), Federal Budget changes, the Henry Review, the Cooper Review and the Ripoll Inquiry.
We began the year deep in the GFC and surrounded by uncertainty. If there was a positive, it was that fund members became more engaged in their super; the downside was delivering news of two successive years of negative returns.
The super industry knuckled down and got back to basics, communicating and engaging with its members like never before. Consumer confidence may have wavered but, as confirmed by the recent Association of Superannuation Funds of Australia (ASFA) research into community attitudes to superannuation, fund members remain positive and are largely satisfied with their super funds.
In May, super took a double blow with the interim Henry Report and the Federal Budget announcements. Again, the industry came out fighting. ASFA called on the expertise of its members to assist with further submissions to the Henry Review panel. Again, communication and engagement with fund members proved to be pivotal. This time it focused on the concerns fund members had with the constant tinkering of super by governments and its impact on their long-term retirement planning.
We now await the release of the full report from the Henry Review. The industry has lobbied hard for the changes it would like to see made.
There is little doubt we will see more changes afoot, but continued tax incentives to invest in super will remain, with more focus on equity and long-term income streams.
The announcement of the Cooper Review was initially greeted with some dismay — ‘not another review!’. But now that the detailed scope for phases one and two have been released, it is beyond dispute that this is a real opportunity for the Australian super industry — and this is our chance to drive the changes we have wanted for so long.
Never before has super undergone a review that is looking under every rock and into every crack. Cooper should not been seen as a negative. We will see greater industry efficiency and the roadblocks to innovation broken down.
Drawing the year to a close has seen the release of recommendations from the Ripoll Inquiry into Financial Products and Services. While the Government has stated that these recommendations will be considered in conjunction with the findings from the Cooper Review, there is no doubt that the financial advice landscape is about to undergo dramatic change. Fiduciary duty has taken centre stage.
There seems to be a view that by ‘obtaining informed consent’ about remuneration and conflicts, an adviser may discharge their fiduciary duty. In my view, we must remember that informed consent is not always possible. Addressing this in the regulatory framework is vital. In discharging their duties, many trustees cannot assume informed consent, but must deliver what is best for the fund member.
It is also important that any legislation that comes out of the Ripoll recommendations does not hinder super funds from continuing to provide advisory services to members. There needs to be a limit on ceasing payments from product manufacturers to advisers.
The super industry has come out of 2009 a much stronger and united entity. It has been a year of uncertainty, a year of change and a year of opportunity. It has reminded us that we are one industry that must work together and take advantage of the opportunities that will be presented to ensure we develop a superannuation system for the benefit of all Australians — both today and for future generations.
Pauline Vamos is chief executive of the Association of Superannuation Funds of Australia.
