Cooper Review ignores investor education
The Cooper Review is focused almost exclusively on fee reductions through the introduction of the “paternalistic” MySuper, while ignoring the importance of financial literacy, according to head of Australian Unity Investments David Bryant.
Speaking at the Financial Services Council annual conference in Melbourne yesterday, Bryant said more work needed to be done before the Government implemented MySuper.
“The Cooper Review has taken, as its starting point, the assumption that people don’t want to care about their superannuation. It has then focused on the central tenet that improving the cost and competitiveness of the superannuation industry is all that is required to ensure Australians will have enough money to fund their retirement,” he said.
However, he asserted that the review proposals were trying to fix something that wasn’t broken, being cost and competitiveness.
“We have seen significant rationalisation over the last six years – the number of super funds has decreased by 60 per cent – and fees are down from 135 basis points to 112 basis points over a similar timeframe. Clearly, competition is working to improve scale, drive down price, and ultimately improving the quality of the offering as well as delivering innovation.”
Bryant said the one area where the industry had not succeeded was improving investor education, adding that MySuper would only increase apathy and disengagement. Referring to a Financial Literacy Foundation study, he said over three-quarters of Australians were interested in learning more about planning for their long-term future and wanted to know more about investment.
“But MySuper will actively disengage people and encourage them not to care, not to try to learn more, and not to participate in saving for their own retirement. We are giving up on the idea of engagement before we have even tried it,” he stated.
Bryant said longevity risk and the escalating costs of care were serious considerations that needed to be addressed their investor education.
“The inconvenient truth is that, with our rapidly ageing population, we need people to take responsibility for their financial position. But at a time when it is more important than ever for people to get involved and take an interest, we are mandating the opposite approach and encouraging the wrong behaviour,” Bryant said.
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