PwC urges super funds to embrace future-facing sectors

The financial services sector is set for significant transformation with superannuation to play a pivotal role in shaping the next frontier owing both to its large cash pool and Australia’s growing population of retirees.

New research from PwC has found that the financial services sector is set for a decade of disruption driven by AI, climate change, geopolitics and global players crossing sector lines, requiring trillions of dollars of capital as well as innovative risk management strategies. 

As Australia's economy evolves, PwC contends that banks, super funds, insurers, and private capital will all need to move beyond conventional sector-specific approaches and risk assessment models to adapt to these new demands.

With over $4 trillion under management, the firm is backing the superannuation sector as a significant driver of this next phase of national development, with good reason to seek future-oriented sectors which offer stable income and sustained economic prosperity.

Faced with an aging population, the focus of super is shifting from growing wealth to providing reliable retirement income, essentially changing where and how funds invest.

“It opens the door for super to support future-shaping sectors, and infrastructure - like data centres and digital connectivity, energy and social services - that offer reliable income over time and contribute to economic prosperity,” PwC analysis stated.

Additionally, the firm argues that collaboration between sectors will be important in this next phase, with superfunds uniquely positioned to co-invest and collaborate with other players in the finance space including banks, insurers and the government.

Crucially, PwC research indicates that top-performing organisations are more than twice as likely as their counterparts to generate at least 60 per cent of their revenue from business ecosystems, with high-performing companies also 1.6 times more likely to strategically utilise ecosystems for gaining access to new markets, capabilities, and insights.

For example, pioneering companies are now collaborating with vehicle manufacturers, battery manufacturers, energy retailers, energy producers, and tech companies to create an ecosystem where drivers are paid to effectively loan their car battery to the grid.

PwC added that global players like Apple, Microsoft, and Amazon, are already doing this by moving into growth sectors such as finance and healthcare, as demonstrated by Apple's venture into Apple Pay.

“They each benefit from being part of the ecosystem and none can do it alone,” stated PwC.

The firm suggests that super funds can apply this theory to tackle national issues such as housing, climate resilience, and aged care by employing co-investment and co-design in solutions.

One such area identified as ripe for cross-sector collaboration between banks, super funds, and insurers was the transition-to-retirement space. Essentially, by working together, PwC argues that these entities could develop improved products and services to better support individuals during the underserved retirement transition phase, while delivering enduring economic prosperity and positive outcomes for retirement savers.

Overall, the firm advised a proactive reallocation of capital to emerging sectors, emphasising the risk of delaying such a move.

“Because seizing tomorrow’s growth means funding the momentum now, not waiting until the path is certain,” it concluded.