The next 20 years will see super funds grow to resemble banks, and advice within super transform beyond intrafund offerings, according to the chair of the Super System Review, Jeremy Cooper.
“Super funds will look a lot more like banks in terms of their scale, sophistication and their influence in the macro economy,” Cooper said at last week’s Russell Investments summit.
“Advice will transform beyond the intrafund world where there is just boundless opportunity for people who are in that zone approaching retirement to get bespoke advice with the assistance of technology and scale that the intrafund idea will bring about,” he said.
“Technology will allow bespoke life cycling within a superannuation fund so we’re moving much more towards the individualised account and the concept of a fund will start to disappear for most members.”
The growth in self managed super funds (SMSFs) would also continue, the total superannuation fund population may drop below 100, all super funds will have overseas directors and more than 40 per cent of trustee directors will be female, Cooper predicted.
There will also be big changes in life insurance, and health insurance may merge with super. “Why is another retirement product sitting out entirely by itself?” Cooper asked.
Cooper also predicted further regulatory reform triggered by the overall growth in the industry, with up to three regulatory bodies.
“One possible model is that direct contribution super moves into its own regulatory house and is joined by funds management,” Cooper said.
Responding to last month’s claims from Chant West principal Warren Chant that MySuper could lead to lower member returns, Cooper said that MySuper was never meant to be about minimum costs and ultra passive investments.
“[MySuper is] supposed to optimise the strategy that’s intended to produce the returns but you also have to very carefully manage costs so there’s a tension between paying high management fees and the overall cost of the product,” he said.
Chant West data which showed industry funds had performed better in more expensive asset classes relied on a dataset that was “way too small and too short to be drawing systemic conclusions about what asset classes you should be in and what management fees you need to pay,” Cooper said.
MySuper fully caters for funds that want to pay high investment management fees to tilt all investments into those asset classes so long as the trustee is fully accountable and explained their decisions, he said.
