Australia has an enormous opportunity to build a world-class decumulation system that gives individuals security and flexibility in retirement, but it’s different from the accumulation phase.
FOFA demands higher professionalism, improves client confidence and presents opportunities for reputable advisors. The cleansing effects of the legislation are expected to outweigh the costs in the long term.
There are important features which distinguish the different lifecycle offerings and they can have a significant impact on member outcomes. Rating agencies will need to adapt their processes versus normal balanced funds.
Don’t judge the extent to which institutional investors influence listed companies by the big public event, the AGM. Private meetings with executives of listed companies are ongoing and lively.
When a fund is open to the public, there is a dilution of the influence of those who were ‘looking after’ their members – unions and employers. Super funds may need to better balance leadership and consensus management styles.
Super funds should provide a calculation of a member’s actual average return over their period of membership based on their own personal cash flow of contributions and fees experienced.
The big global trends in funds management are a move from equities to fixed interest, from active to index, a reduction in fund commissions, and increased dominance of the biggest managers.
Anyone responsible for product design and pricing in the superannuation industry needs an understanding of the revised Australian Prudential Standards on bank liquidity. Some creative solutions may be needed.
The Stronger Super reforms have significantly raised the profile of lifecycle funds by legitimising their use as a single investment strategy for MySuper products. But are lifecycle funds any better than normal balanced funds?
In Cuffelinks on 2 April 2013, we posted an article on bank liquidity. Alun Stevens, Principal at Rice Warner Actuaries, took issue with some of the conclusions, and a lively debate followed. Warning: very long and technical.
The nation’s savings are in superannuation and the nation’s funding needs are in the banks. Yet the regulators and the new liquidity rules make it even more difficult for the two to get together, with another free kick to SMSFs.
Significant market-shaping forces are in play which will disrupt many wealth management business models, but with change comes opportunity.
The sad fact is the government guarantee on deposits does not apply for individuals investing in deposits offered by public superannuation funds.
Lifecycle theory is one of the more exciting and applicable research fields in financial academia yet it receives little discussion in Australia’s superannuation industry. The findings have the potential to improve outcomes for Australian households.