The biggest disruption to superannuation and its associated industries comes not from innovative technology companies, but from the government, according to JANA.
Speaking at the Investment Management Consultants Association (IMCA) annual conference, John Coombe, executive director of JANA, said it doesn’t matter how it is looked at, the superannuation industry only exists because it was legislated into being and it could be legislated out of existence just as quickly.
“They legislate and change the legislation every time we look around,” Coombe said. “If you think about the evolution over time, we’ve had choice, we’ve had independent directors – I wonder what sort of hunches they are now having in the Treasury and finance department about how they can rip money out of the super industry and get the budget back into surplus.”
He added it was well known that asset allocation was where the most money was made, but it was conceivable that budgetary requirements might lead government to legislate on asset allocation to infrastructure, social housing, or government bonds.
“One day they might turn around and tell us we need X amount in socially responsible investments,” Coombe said. “That would be a real change for us in terms of the freedom we have had.”
Coombe’s remarks were made in terms of the context of the IMCA annual conference’s theme of disruption.
Simon Eagleton, senior partner and investments business leader in the Pacific at Mercer, predicted the demise of asset consultants, at least in their current form, because changes in legislation had reshaped the landscape.
“These are perilous times for the traditional model of asset consulting. When I started there were hundreds and hundreds of clients at Mercer; now the number of full service deep engagements are in the dozens,” he said.
“Frankly, there are only 35 funds in this country that would be prepared to pay the fees of the John Coombes and the Simon Eagletons. That doesn’t sound like a very deep market for a thriving business.”
Amanda Gillespie, joint chief executive of Lonsec Fiscal Holdings, said that consultants and research houses that are able to harness digital disruption will have a strong role to play, particularly those that can effectively aggregate data, repackage it and sell it back to their clients.
“Rather than being the decisionmaker, it’s all about empowering your clients to make their own decisions,” Gillespie said.
The threat of disruption for fund managers was tackled by Dr Kyle Kung, managing director of State Street Global Exchange. He said that fund managers had the opportunity to take advantage of digital disruption before outsiders entered the market, mainly due to their understanding of clients and the information they held on them.
“We understand the industry better than any IT start up, so it is a battle for us to lose, give up that advantage.” He urged fund managers to put right the relative lack of investment in digital technology historically and to hire more IT and internet specialists.
He added that for the first time, those graduating from MBA courses no longer aspire primarily to work in the financial services sector; rather, they are looking to the venture capital industry, hoping to be part of the next “unicorn” – a start-up company whose valuation has exceeded $1 billion (Uber, Snapchat, Dropbox and Airbnb are all examples).
