There are many unknowns but member communications sits at the centre of Australian superannuation funds dealing with the move to a Trump presidency, according to a Super Review roundtable conducted during the recent Association of Superannuation Funds of Australia (ASFA) annual conference. This is part two of a roundtable.
Mike Taylor (MT) – managing editor, Super Review
Alex Hutchison (AH) – CEO, EISS Super
Andrew Proebstl (AP) – CEO LegalSuper
Andrew Boal (AB) – leader, Willis Towers Watson
Russell Mason (RM) – superannuation partner, Deloitte
Helen Davis (HD) – chairperson, Superannuation Complaints Tribunal
Glen McCrea (GM) – policy director, Association of Superannuation Funds of Australia
Wayne Sullivan (WS) – director of marketing, Frontier Investment Consulting
MT: So last night’s events, we have Donald Trump as the President elect of the US. Markets have done some interesting things. What do we think about it from a superannuation point of view given that it’s supposed to be a long term investment anyway? And I’ll start with you, Alex.
AH: Thanks, Mike. Superannuation is a long term investment. I think things will settle down and I think the only question is really one about if protectionism comes to the fore and if the US retreats, as is speculated, and becomes more isolationist, so that’s the only short-term measure, but really, at the end of the day, the sun still shines and the birds still sing.
AP: I think I agree completely. I think the other aspect, which the fund will have to really think about is even though we, as people who run super funds should take the long-term view, our members may not necessarily land on that sort of long term view, so we might need to do some extra things to manage member expectations or reactions to what’s happened.
I can certainly recall when the GFC happened and even though our members have probably got a higher level of financial literacy than many other funds, there were people who were asking questions like are you selling shares, what are you doing in response to this? So I suspect, in this situation, similar questions will come up. But then maybe having had the previous experience they will be tempered, somewhat, compared to what they were post GFC.
MT: Andrew Boal?
AB: I think he’s already shown, you know, the signs of willingness to take advice and listen to other people and be more conciliatory than he had been at the beginning of the election and his platform is always pro-business.
So I think from a longer term perspective, I think the US is still Australia’s second largest trading partner, so I think if he is pro-business and the business outlook in the US improves as a result of not Donald Trump but Republican views, then that should be reasonably good for the US economy and therefore its trading partners.
Now the other side of that is he wants to renegotiate some of its trading partners but I don’t think Australia would be one of those.
RM: I agree with everything that’s been said, Mike. I think one thing people over-estimate is the power a US President has at one level. It is a very powerful position but there are lots of checks and balances so it’s not as though he’s going to be able to launch huge change that could be not in the international interests.
Now, there will be change, there will be a period of uncertainty but as has been previously said by Alex and Andrew, both Andrews, it will settle down. The markets are already, I think.
I think members, some members will be unsettled by it and hopefully the message we get the message out to them to just stay the course, things will settle down in the next couple of months.
HD: So I would agree. It’s like the noise out of the short-term, if you like. Where the long-term sits [is] we’re already in an environment where, longer term, we’re in a lower return type of environment.
So I think to the point around member expectations and communications that was sitting as the reality we had to deal with. I think this probably heightens the importance of how funds get that message over. So I think in the short-term some of the immediate lack of confidence on the part of members has been heightened.
As an industry we can proactively and as individual funds work to address that [lack of confidence] because certainly in the world of complaints, where sort of expectations aren’t delivered on is where complaints arise.
GM: Yeah, I think changing that conversation is very important for the industry and making sure members look at that 10 year plus horizon because, ultimately that’s what super is about, and even despite having the GFC, the story is a good one.
Look, there are also opportunities for funds as well. Trump’s come out and said infrastructure’s a big deal for him and he’s going to spend a lot. So there’s opportunity there for funds to potentially invest in America in infrastructure and we know that’s a good long-term option for funds that have been able to do that.
WS: I had about six points in my mind initially, I think they’ve all been covered.
MT: That’s why I left you till last.
WS: I appreciate that. To pick up on Andrew Boal’s comment, which I agree with, if Trump heads in a certain direction then there could be an adverse impact certainly on China and ultimately that could flow through to Australia and it just becomes another factor that’s fuelling the lower for longer environment that we’re in.
And then picking up on a comment from the other Andrew, Andrew Probstl, in relation to member communications and, you know, in a former life I was the head of marketing at super funds so I have an interest in that space. One of the ironic things that came out of the GFC was an increased interest from members in the superannuation. It’s one of the strange sort of oddities.
HD: It is a good trigger for engagement.
WS: I think these sorts of issues like Brexit, Trump, et cetera, if there is an upside, that it does get people interested and attuned to their super and asking questions and it’s great to have members engaging with funds and asking these sorts of questions. But having said that, those numbers are still pretty small.
I would remember sitting at Sunsuper or Hostplus and someone from the call centre would ring up and say “We’re getting smashed, we’re getting smashed with calls.” And you’d go, “How many calls have you had?” “We had six people ring up this morning.” “Well, we’ve got a million members so six people ringing up to ask a question really hasn’t been smashed.”
It points to the fact that there would be more members who are interested and not necessarily jumping on the phones but I think as time’s gone on, the funds have gotten much better at educating their members and, you know, this will be just be another opportunity for us to say well, Brexit came along, the markets went down, they went up, life sort of carried on, most likely this will be the same thing that happens here, we have to ride these things out, help deliver the long term story.
HD: I do wonder this is slightly deviating – but I do wonder about the China relationship. How that American China relationship will work and then how we fit into that and where the world look to us on that. I don’t have a feel I’d be interested if people do around the table as to how that might manifest.
AB: Following on from the great presentation yesterday from Freedman, just all the Putin, Russia, all of the Eurasia issues that he talked about, what does that mean today and that’s interesting. The rhetoric was seen to be under control and Rick Freedman was saying that’s it was just rhetoric in Putin and other things. But could someone else allocate the rhetoric?
WS: You do get a sense that we might be living in interesting times. It adds to that level of interest, doesn’t it?
AP: I think on one view with the whole Trump thing is the country has gone through that long, tortuous process of a campaign and the voting and it’s been going on for so long and it’s actually really taken everything down to almost its lowest point and I think people expect Trump to be now in power to be divisive and create, you know, havoc and blah, blah, blah.
I mean how much worse could things get given where things are? He has a huge opportunity to take things to a better place if he can do it. And I guess that’s what’s got to be the key thing, if he can actually bring it all together and take people to a better place, not the greatest place and not one that everyone agrees with, but if it’s better, he may be actually viewed more and more favourably over time if he gets to that point.
AB: And to Russell’s point before, but I think he’s not a career politician. So he will listen and take advice and I think from others who have been there and been around the system for a lot longer than he. So I would expect that, yeah, he’s not a one man band.
WS: It’s not a common trait with narcissists, though, is it, to take advice from people so it will be interesting to see whether he actually does and I mean another common trait of a narcissist is to surround yourself with people who are actually not that capable.
So the people he has around him will be critical to the extent in which he listens to those people, it will be interesting. He might lose interest in it in six or 12 months and move onto something else and effectively leave a lot of decision making up to others which might not be a bad outcome.