Fix default funds, says Russell head

The Australian superannuation funds industry needs to improve the performance and accessibility of default superannuation funds and not expect individual fund members to become de facto chief investment officers, according to Russell managing director, Chris Corneil.

Corneil has used an address to the Fund Executive Association Limited’s (FEAL) annual conference to argue that while member education is useful, “attempts to educate the vast majority of members to make more investment decisions are fundamentally misguided”.

“Now, that doesn’t mean financial literacy isn’t important. The ability to make informed decisions about the use and management of money is critical,” he said.

“However, I believe helping our members become their own CIO is a fruitless and somewhat irresponsible exercise.

“Just like you don’t need to be a pilot to get from Sydney to Melbourne, members don’t need to know how to construct their own portfolios to be set up in retirement. But to make the journey you do need enough money for the ticket, an idea of the flight plan and you certainly need to know what you’re going to do when you arrive.”

Corneil said that when it came to planning for retirement, he believed the industry should focus on helping members answer three key questions including whether they had enough savings for retirement, how they could ensure their savings lasted the distance and whether they had enough insurance to protect their families.

However, he said that if the industry accepted that it should not expect the average Australian to make asset allocation decisions, then it had to also accept that it needed to build better default funds.