This week the Royal Commission dramatically exposed the leaky house syndrome of Australia’s financial services sector. It’s becoming increasingly clear this isn’t a fix up job, this one requires a complete rebuild.
When it comes to superannuation, patching up a damaged business model, as the FOFA reforms have attempted to do, hasn’t worked. IOOF and MLC are living proof of a bad paint job. In fact, we can now see the asbestos of advisory fees continues to pollute the very foundations of our sacred retirement system, a toxic-mess its builders and architects have so far refused to confront. This rot goes deep.
The commission has artfully exposed how jargon and legalese have woven a dark spell of apathy over Australians. But many are now waking up from their trusted slumber. And what a rude awakening that has been! The commission may even raise some irate dead people from their resting places, with news even they can’t escape advisors’ fees after death. Alongside taxes, it seems having your retirement savings gouged is another one of life certainties.
But to that end, while getting angry is one thing, we must get interested too. And we must look forward.
Superannuation is a fundamentally brilliant concept, but it was designed for another era. An era where we left school or university, had one or two jobs, married young, bought a house and then retired.
As Australia prospered it saw a flow of money into super, which soon became a honey pot too sweet for financial markets to ignore for long. When baby boomers’ lives were good, little attention was paid to those individuals and organisations drizzling that honey over their commissions’ crumpets.
But how life has changed. Younger Australians now have multiple jobs, will continuously retrain and recondition throughout their lives, remain single for longer (often by choice) and either can’t, or don’t want to buy property. One in five Australians aged between 25 and 34, on low incomes, now have only a one-in-five chance of owning a home. The wealth playbook that worked 20 - 30 years ago, now feels seriously outdated.
It’s time we reset the button on super and wealth creation in general. We need to go back to first principles and think about how we would design superannuation, housing and wealth creation for the next generation, if we were starting today, with younger people in mind.
We need to design a system where advice can be delivered contextually via technology, in those hot-state ‘spend or save’ moments - arguably when we need it the most. Not once a year, in an office, knee deep in acronyms and A4 paper.
And what about regulation? That has a huge role to play. If we are building from scratch, regulators must be part of that conversation, working with new startups to enable direct see-through into new platforms and the wealth eco-system as a whole.
It might be white hair in the witness dock, but there are plenty of new fintech founders with a white-hot passion to solve super for the next generation. Let’s open our minds to what’s possible if we look to the future, with an ever-watchful eye on what’s happened in the past. Lessons can and must be learned.
CEO and Co-Founder at Zuper Superannuation. Loves fintech, writing, pilates, Campari and soda's and, as of 2018, marathon running.More