It would take a very brave person to look desperate Australians in the eye right now and encourage them not to access part of their superannuation to cover short-term necessities like housing, bills and groceries.

Yet, many super funds are pushing their members to focus on the big picture and stay invested for the long term because saving for a comfortable retirement should be their top priority.

This classic response is straight from the industry’s crisis communications playbook, but it is grossly inadequate for this time, especially 12 years after the Global Financial Crisis.

It highlights that the constant, guaranteed flow of members’ money has made the industry complacent and unwilling to manage its responsibility to meet both the short-term and long-term needs of members while achieving its mission to deliver income in retirement.

A much more considered member-centric approach is needed, starting with the dismantling of flimsy, long-held beliefs such as investment markets inevitably recover beyond their previous peak (tell that to Japan); a comfortable retirement costs $1 million (it doesn’t); and four to five investment options offer adequate choice (they don’t).

These beliefs are the result of a myopic focus on the long-term at the expense of all other timeframes. It is holding funds back from developing more robust, customised and user-friendly solutions.

It seems that the short-term needs of members and the long-term agenda of funds are on course for a violent collision, as more and more members reach retirement every day.

Short term is different

If the industry is serious about its mandate to serve and protect the financial health and wellbeing of the community, then industry leaders, politicians and regulators will need to approach their jobs differently.

Trustees of super funds will need to get passionate about their fiduciary role as the trustee of members’ money and finally deliver the dignified retirement they promise is the result of focusing on the long term.

But, in the meantime, we all live day-by-day and the short term can be an incredibly volatile place. To successfully navigate this rocky and potentially dangerous terrain, funds will need a different mindset and a new set of skills, tools and technology.

With the crutch of the ‘long term’ removed, an acute focus on risk and its effective management will arise.

Managing risk – be that controlling the spread of the Coronavirus or protecting the retirement plans of members – requires trustees to ask questions, challenge assumptions and plan for every possible scenario no matter how seemingly unlikely.

Ironically, too much focus on short-term performance has resulted in perverse behaviours and incentives. Mega fund mergers and increasing regulatory pressure on funds to boost scale and reduce fees has exacerbated the problem.

Even the much-lauded ‘Member Outcome’ legislation was quickly superseded by the prudential regulator’s heatmaps, which appeared more intent on analysing fees and returns than considering the retirement outcomes provided to members and the ability of funds to deliver them.

It is during difficult times like this, that any gaps in the system are exposed.

For example, the practice of seeing members as one of four or five arbitrary investment buckets rather than individuals in their own right fails to recognise that we are all different. Each of us has different goals, expectations and risks.

Funds like HostPlus and REST are all-too-aware of the problems facing their members, with many retail and hospitality workers currently grappling with unemployment, underemployment and severe financial hardship.

Funds with an older member profile, such as UniSuper, have challenges too. With the bulk of their members either in or close to retirement, they face the shock of seeing their superannuation nest egg destroyed.

The tragedy is that this is not the first crisis we are experiencing nor will it be the last.

As demonstrated by the 1987 stock market crash, the 2002 Tech Wreck, the 2008 Global Financial Crisis and now the Covid-19 pandemic, 1 in 100-year events can come in clusters.

The challenge for the super industry is to accept that another 1 in 100-year crisis is already in the making and start preparing for the inevitable. Funds must act decisively to differentiate themselves, break away from the herd and lead the industry in a post-COVID-19 world.

In order to do so, they will need to know their members better, which requires systems and technology that can efficiently capture, record and analyse member data. They will also need a laser focus on meeting their members’ current and future needs, and adequately managing risks no matter what life may throw at them.

Wade Matterson is a principal and leads the Australian practice of Milliman, a global actuarial management consultancy firm.

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