What’s wrong with our industry

Jeff Bresnahan
by Jeff Bresnahan*
At the annual SuperRatings Awards dinner in Sydney last week, the research firm’s founder outlined four major issues the industry should address: fee obsession, insurance ‘ambulance chasers’, over-regulation of governance and forced fund mergers. This is an edited version of his speech.
This is a night to celebrate the industry’s achievements. But before we do can I just briefly jump onto my soap box?
For those of you who were at the conference [Day of Confrontation] today you would have heard me say that over the last eight years we have endured six Ministers who have been either directly or indirectly responsible for the superannuation industry. With an average tenure of just 15 months each, it is quite difficult to have any confidence in the Government’s decision-making process.
So, it is no surprise when successive governments commission inquiry after inquiry, which – surprise, surprise – come up with the old chestnut of fees. Yes, fees are important, but analysing them in isolation is a recipe for disaster. It can be a race to the bottom to the detriment of Australians’ retirement savings and, consequently, the economy.
The reality is that there are reasons for certain pricing around the world, including Australia. How about, rather than isolating fees, we actually review funds in their totality and try to maximize Australians’ value for money? Or is that too-hard a concept for our politicians?
There are a number of easy wins out there for the Government, not the least of which is to fix the problem of ambulance chasers stealing large chunks of members’ insurance benefits – benefits to which members would have been entitled in full and which will now compromise their ability to handle a disability. By all means allow lawyers to get involved when a claim is denied, but for the vultures to simply fly in and grab a large chunk of the payment without doing any meaningful work borders on criminal.
Similarly, can we get away from over-regulation in the industry? Regulations have strangled innovation, which, in turn, commodtises people’s experiences. Mainstream Australian superannuation funds, which manage the hopes and dreams of over 95 per cent of Australians’ retirement benefits, have a strong track record in terms of governance over the past 23 years [since the Superannuation Guarantee].
Sure, there have been some isolated failures, but members have been recompensed and funds continue to deliver for members. I would quite confidently say that failures in the superannuation system going forward are far more likely to occur in the SMSF sector rather than mainstream APRA-regulated funds. Let funds get on with delivering services rather than have them focusing on compliance issues.
Lastly, there is the misguided call for funds to be of a certain size. How about we just nationalize super and ensure Australians reap the maximum benefit of scale? An indexed fund with identical insurance benefits should do the trick. Or, more realistically, how about we let market forces continue to operate?
Poor-value funds continue to suffer in the industry and it is a given that the quicker these funds are wound up the better. However, bigger is not always better and unless you want to mirror the big four’s banking dominance, our view is that it is a value measurement rather than a size measurement that is the key question.
There are plenty of examples, across multiple industries, where smaller operators provide significantly better service than their larger counterparts. Telecommunications and banking, to name just two. So, let’s take a measured approach to the whole discussion regarding size rather than firing a shotgun to take them all out…
*Bresnahan, the founder of SuperRatings and chair of its holding company, Lonsec Fiscal, also thanked his staff and the event’s major sponsors and announced the final winner for the night, QSuper, as Fund of the Year. For all the results go to: www.superratings.com.au

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