The Stolen Superannuation Generation

It's very rare that you'll find me applauding a government (it only encourages them), but I did think that Kevin ‘07's "sorry" gesture to the stolen generation was the right thing.  Sometimes a simple "sorry" can do immense good and in the words of the Indigenous leadership of the time it "enabled the healing to begin".

So how does this relate to superannuation you ask?  Quite simply, I am yet to hear a Retail or Industry Super Fund, their advisers or managers, say "sorry" for the part they have played in trimming our standard of living in retirement during the recent volatility and decline in share markets.  

Don't get me wrong, I know that there is no crystal ball, but just as KRudd's gesture started a healing process, some sort of gesture from the superannuation community might be the catalyst needed to start changing a system that is clearly flawed.  The trouble is does anyone within the superannuation industry really want to foster change? 

To explain this you need to understand that Superannuation is a Trust and Superannuation law states that the Trustees have a duty to represent their members’ interests.  This includes making appropriate independent investment decisions, (including managing risk and insurance) on behalf of members.  In SMSF every member is a trustee, so trustees are pretty keen to make good investment decisions because it's their own retirement on the line.  For most Retail and Industry funds there is usually an independently elected Board of Trustees to make the decisions on behalf of members.

But how impartial are these duly elected Trustees and do they in fact act in our best interests?  Why is it that no one in the superannuation industry or the Regulator queries the Board of Trustees when they invest large portions of members’ money in-house?  Maybe it’s time for us to ask the tough question “whose side are the Trustees of my super really on?”

Here is an example, AMP run a superannuation fund called AMP Superannuation Savings Trust where AMP Superannuation Limited is the Trustee.   On behalf of its’ members, the Trustees research the most appropriate investments to make and can source the investments or insurance from anywhere they choose that will best benefit the member's retirement, death or disability.  AMP Trustees reported in the AMP Superannuation Savings Trust Annual Report that they have chosen to invest a large chunk of the fund's money with AMP Capital Investors and place all the insurance with AMP Life.  So what happened to the impartial research process then?  Is this really the best decision for members?  I bet the AMP shareholders think this is a great decision. 

Why am I singling out AMP?  Well, I'm not.  In fact this is pretty much the standard model used by all fund managers to run Retail Super Funds, hence the reason why I'm suggesting the system needs to change and why so many disgruntled people are turning to Self Managed Super.

900,000 Trustees of Self Managed Super Funds control approximately one third of all superannuation money that was previously invested in Retail and Industry Funds and who are, according to the Governments own research, making a pretty good fist of things.  

AMP's response has been a sizeable move into the SMSF space, buying up every Self Managed Superannuation business they can find in a strategic ‘if you can't beat 'em, join 'em’ move.  I recently saw a statement from AMP Financial Services Chief Executive Craig Meller where he said that to date the Australian SMSF segment had emerged as something of a "cottage industry" that was now "ripe for industrialisation".  Well I've got news for any large fund manager who wants to "industrialise" Self Managed Super.  Australians are voting with their feet and moving to SMSF to escape the superannuation "industralisation".  Any positive move into the SMSF sector needs to be accompanied by a very un-industralised "sorry".  When that happens the healing might begin.

What do you think? Post your comments if you feel as strongly about this as I do or feel free to Contact Us if you want to have a chat about your superannuation.