The Politics
Treasurer Jim Chalmers recently announced his idea of what is best for Australians and our economy as we all aspire (or is it struggle) towards a better life. Politicians are renowned for boasting about anything remotely positive and shirking responsibility for any poor and potentially catastrophic economic decisions.
Generally speaking, both sides of politics seem to have distinct and opposing views on most things without the capability to consistently do the right thing for all the people they represent.
Super is the perfect example where both sides of government have passed regulation after regulation over the past thirty years but have failed to set concrete principles on who owns the asset and its fundamental purpose.
In a simple statement of fact, super is a personal asset. Employers fund it, the individual owns it, and the government regularly manipulates it.
Prime Minister Anthony Albanese recently stated that the purpose of super is so “people have dignity at the end of their lives” and that “it is also an extraordinary national asset, a pool of funds available for investing in long-term infrastructure and other investments”.
The Proposition
All stakeholders have a shared responsibility for optimising super at an individual account level to ensure every employee can enjoy a safe and prosperous lifestyle in retirement.
Who are the Stakeholders?
In addition to the individual who owns the asset, there are four other authorities involved with super:
- The Federal Government
- The Regulator
- Super Providers (trustees, platforms, and products)
- Employers
Who is Responsible for What?
Each stakeholder has an existing approach reflecting what their perceived responsibilities are:
- Both political parties seem to agree that super is as much (or more) a national asset as it is personal, with the government already accessing some of it and plans to access more through its Manufactured in Australia policy.
- The regulator excels at defining what not to do and punishes transgressors, yet fails at clarifying an optimal approach.
- Super providers offer an account administration mechanism to track asset balances. They do not provide services or advice for optimal wealth creation.
- Most individuals lacking financial awareness assume that the default MySuper option offered by super providers is an optimal super strategy.
- As the authority that funds the asset, most employers fail to treat the company-selected default super provider as they would any other service provider (i.e. regularly conducting an assessment against defined measures of value).
What is abundantly clear is that all parties must examine their current approach, as the optimal service model for super is far from defined.
What about Advisers?
Legislated by the government and overseen by the regulator, super is a personal asset owned by the individual, funded by the employer, and administered by super providers. Advisers provide service and advice to help individuals create optimal wealth from this significant asset.
There are generally two advice options:
- Comprehensive – high-cost, high-margin, complex advice that considers all aspects of an individual’s financial situation and objectives.
- Limited – low-cost, low-margin, simple yet high-quality advice focused on a singular aspect of an individual’s financial situation and objectives (i.e. superannuation).
Most financial planners target high earners with a high super balance to sell them comprehensive advice. The proportion of individuals in most workforces who meet such criteria might be around 20%. Annually, a financial planner might expect to win over 20% of this population (about 4% of the workforce). So, at least 80% of the workforce is overlooked and potentially missing being informed of significant opportunities to better manage super as a wealth creation asset.
Based on actuarial analysis, most employees fail to optimally manage their super such that they under-realise their potential income in retirement by over 30%.
Find Out More
Give your employees the benefit of access to low-cost, high-quality service and advice to help them better manage super as a wealth creation asset.
Contact Richard Matsinger or Ryan Teo at 1800 467 467 or email consulting@axisfg.com.au
SuperWiser is the online client portal AXIS uses to deliver limited advice and ongoing servicing at a fraction of the cost charged for comprehensive advice.
Check out www.superwiser.com.au