Super Flaws
Super receives lots of attention from the government and regulator, most of it involving negative commentary about breaches in regulation. What is interesting is that none of the commentary from the government or regulator focuses specifically on how the public can optimise their super. For instance, the government introduced MySuper as a default strategy. MySuper is not an optimisation strategy.
Every MySuper option has design flaws, one being the de-risking of assets based solely on age, with zero consideration of market conditions.
Positive re-regulation of super must focus on the quality of service delivered to optimise the asset at an individual account level.
Can Employers Make a Difference?
Change and improvement must start somewhere. Historically there are many examples where a need for action was obvious but never enacted because of lazy thinking across all responsible bodies. Politicians will have you believe that all good initiatives come from them. However, when mistakes emerge, someone else is to blame. Employers fund super, whilst employees own it. The problem is most employees know little about optimally managing their super and end up in the MySuper default. Be it in the company super plan or own choice of fund. Consequentially, employers have a significant role to play by providing employees with access to relevant information and resources to help them better manage super as a wealth creation strategy.
Most employers successfully manage employees into the workforce but are less focused on successfully managing employees into retirement.
Every employee must have an optimised super asset at the point of retirement to generate a projected income in retirement to fund their desired lifestyle after work has finished.
Super Transformation
From an employer perspective, transforming super from a statutory expense into an optimised remuneration benefit needs a combination of specialist skills and legislative requirements, including:
- An in-depth knowledge of super legislation and various products within the financial services industry.
- An ability to provide strategic super advice recommendations to each employee.
- Active investment management capability.
- An automated system that monitors and provides individual strategic updates as dictated by changes in personal circumstances and market conditions.
- Holding an Australian Financial Services License.
The above list may be a challenge to develop in-house, with the logical conclusion being to outsource the initiative to a specialist organisation with appropriate skills and experience.
Superior Super Management
AXIS can manage super in a manner that informs company management and employees and enables confidence in decision-making around transforming super into a superior remuneration benefit.
The initial critical steps are:
- Understanding employers and employees have a part to play in any decision, as the employer funds super, but employees own it.
- Realising that both employer and employees need a source of genuine information to ensure change and improvement go hand in hand.
- Identify problems and execute appropriate solutions instead of working hard on change without obtaining the desired improvement. For example, you might change service providers but not remove the underperformance.
- Determine definitive KPIs for performance monitoring.
- Confirm the mechanism for reporting consistent delivery of desired outcomes each year.
Managing these steps requires the establishment of a Consultation Team consisting of 2 managers and between 4 and 8 employees especially selected to cover all demographics. The Consultation Team initially meets to assess the existing super arrangement and to examine options offered by the financial services industry in considering what to do next The Consultation Team is to meet twice a year to review the performance of service providers in delivering superior value at a low cost.
Contact AXIS
For a further discussion about your current super arrangements and how to transform them into an optimised remuneration benefit, contact Richard Matsinger on 1800 111 299 or email consulting@axisfg.com.au
This document was prepared and issued by AXIS Financial Group (ABN 21 092 889 579, AFSL 233680). The information contained within it is not advice. It provides general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making an investment decision. Information in this publication, which is taken from sources other than AXIS Financial Group, is believed to be accurate. However, subject to any contrary provision in any applicable law, neither AXIS Financial Group, nor its employees and directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.
