Superannuation asset values have taken a large reduction due to the fall in all share markets. Furthermore, the recent announcement of $20,000 available for hardship will also reduce asset values and may require funds to liquidate assets that they were intending to hold for a long duration.
These asset falls mean that there will be falling fee revenues for the superannuation funds.
But in times of crises, superannuation funds have a moral responsibility to provide services and support to stressed and uncertain members. They need to help stop members from taking actions or decisions that will result in them locking in short term losses. A normal person that sees large losses on their biggest pool of savings and lots of negative media will want assurance or want to take action. A normal person may ultimately look at the short term market movements and lock in the recent losses. It is important to remind members to look to the long term and effectively communicate and help them from making adverse short term decisions. Superannuation is a long term goal.
We hear stories that telephone networks are overloaded and that the superannuation member helplines are overloaded in these difficult times. We also hear stories that when a member gets through to a helpdesk, the person on the other end is not equipped to provide vital financial advice.
These essential advice services require investment and cost money.
So how do we solve this problem of maintaining and increasing essential services and reducing costs in light of the recent market movements that have reduced income for these superannuation funds?
In the short term, the answer may lie in working together – pooling resources and possibly working through industry bodies like ASFA and AIST. Get the right messages out to superannuation fund members and the public. Medium term, there must be investment in ways to provide vital and relevant advice to members in low cost way through digital services that really look at the member’s individual circumstances. Longer term, there will need to be greater economies of scale through strategically pooling resources with other funds, and merging with larger funds.
This is no different to the message that has been delivered to the superannuation industry by the regulators for some time. However, this recent crisis highlights the impact of not taking action can result in adverse outcomes for members.
Disclaimer: The above is only general financial advice based on the current economic situation and is not tailor-made to one’s specific needs.
With over 16 years global experience in actuarial, superannuation and investment consulting, Neekhil is the Principal Consultant and conduit to clients and the McGing team of analysts.
Neekhil and the team at McGing Advisory & Actuarial provide a wide range of superannuation support services including investment governance and transition, and actuarial advice.