Sherry’s ‘depressing’ long-term view of super industry


by Greg Bright

It may take 20 years but the millennial generation may pose the biggest challenge yet to large profit-for-member super funds. Citing anecdotal evidence from his family and other observations, Nick Sherry says the penchant for new technologies and demand for low-cost services by millennials could be the main driver of super in the future.

The former assistant treasurer and Australia’s first minister for superannuation offered the Northern Trust seminars for super funds and managers in Sydney on April 3 and Melbourne on April 4 a raft of predictions for the industry.

“I don’t want to mention any names because I don’t want to go into outer space,” he said – a reference to the controversial Spaceship Superannuation Fund which had had very rapid take-up of new, mainly younger, members before questions were raised over its true costs and value for members. But, at some stage these sorts of funds would get it right. “Invite me back here in 20 years and we’ll see whether or not I am right,” Sherry said.

Northern Trust’s seminars coincided with the launch in Australia of an ‘Integrated Trading Solutions’ service by the company’s institutional equity brokerage, a part of its Capital Markets’ business within Northern Trust’s Corporate & Institutional Services.. The asset servicing division also discussed securities lending, transition management and foreign exchange management – which form part of its Capital Markets Business. The seminars concluded with separate industry panels in each city (see separate reports).

Meanwhile, other predictions from the former Senator, now an independent director for a number of companies, included:

  • The number of profit-for-member funds will decline by 50 per cent over the next five years. “As a disclaimer, I am currently advising on a number of fund mergers,” he said.
  • He predicted that the $6,000 threshold (under which balances are moved to the ATO for cheaper safekeeping) would be lifted and merged with auto-consolidation.
  • “To my regret there will be no simplification of the super package,” he said. “It is the most complex system in the world.”
  • “In retail, not even I can predict how it will end up… But there will be new retail thematic funds due to technological changes and the SMSF growth flattening out. There will also be greater scrutiny of accountants, who now have to be licensed.”
  • “Many people in retirement will be looking for a less volatile income stream and you will need advice in retirement… Advice in Australia is not advice because it’s not independent. It’s selling a product.”
  • Sherry predicted that more people would be looking to drawn down from their home equity. The average account balance in super was currently about $210,000 but the average equity in their homes was about $700,000.
  • On technological change, he said he could see the day when global technological platforms would dominate financial services. “There will be an end to banks, insurance companies and super funds as we have known them.”

He said the retail sector would have to go through a significant overhaul of its business model. “Retail funds have under-performed but there have also been some consistently under-performing profit-for-members funds. There are more merger talks happening now than ever before.”

Sherry apologised for having what he said looked like “a very depressing long-term view”.

Note: MSI Group and Investor Strategy News assisted in the production of the Northern Trust seminars.