In the next few years, asset owners and managers will have to turn their focus towards tackling emerging social and psychological pressures felt by members and investors due to greater competition in the market, writes Riskwise Professionals’ Paul O’Brien.
Superannuation and investment professionals report that they are just too busy, trying to do more with less and are increasingly stressed.
Rising stress levels are in large part the result of increasing competition from new entrants (like Zuper, Grow, Spaceship, Human Super and others) as well as established organisations.
Down the track, global monoliths like Amazon or eBay could expand into superannuation, combined with new technology such as AI and robo advice.
As a result, this will see our industry become more competitive than ever before.
Most people, including most in management, don’t know how to respond to these increasing challenges and associated pressures. Rather, these challenges are considered threatening to people, increasingly making many of them feel vulnerable and insecure.
This insecurity adds to increasing disempowerment being felt by many. The latest World Inequality Report 2018, for example, shows that the rich to poor gap has widened and is now at its highest level since before the Great Depression.
No wonder the biggest concern for our people is whether their organisation can transform enough to keep up with the changes around them and secure a future (this was also the top concern last year, suggesting that management is having little success in alleviating it).
From leaders right down through the ranks, we continually hear that people are too busy and even more risk adverse than previously.
Similarly, while a majority of people report that they would prefer to work for a more innovative asset owner or manager or even a fintech firm, they currently prefer to stay with the security of their known current employer.
They report that the need their job to pay the mortgage, and will do whatever it takes to keep their job, including being more ‘ruthless at work’.
This demonstrates an alarming trend – just how focused on ourselves many in our industry have become. The pressure will only amplify when interest rates rise, as expected later this year.
As a result, we are at a point where there is a pressing need for the management of our asset owners and managers to increase their focus on our people’s social and psychological needs as well as that of members and investors.
Retirement is not just about money. Certainly, retirees seek financial security and we aim to provide that. But they also need more; they need personal and psychological security such that people feel valued and connected.
Our industry started with a focus on supporting and providing for our stakeholders. But somehow, lately, that focus has narrowed to financial aspects alone.
We need to widen our focus if we are to meet the challenges of today and harness the technology that better empowers people, members and investors in order to maintain and deliver on our role as custodians of investors in retirement.
For retirement phase investors and their advisers, retiring takes more than money
Our industry is very good at estimating, and trying to provide for, how much money our members and investors need for their retirement.
However, there are also a lot of other important factors to retiring.
We don’t invest nearly enough, for example, in providing our stakeholders with the personal, social and psychological tools to retire.
While paying down debt and determining how much money you need to live on is important, so too is what you do to provide ongoing purpose and meaning to your life.
People expect that once retired you will be living the good life. That is often far from reality.
Rather, retirement planning is a process that takes time. There is a lot of psychological work each person needs to do leading up to it.
It can also bring loneliness, boredom, feelings of uselessness and disillusionment and the inevitable question – is this all there is? Some retirees report feelings of anxiety, depression and suicidal thoughts.
Non-financial aspects are as important as financial when retiring
What else should we be advising new retirees?
It is estimated that half of all financial advisers are asked to provide some advice on the social and psychological aspects of retirement. Many cite that they don’t know what to suggest, other than a Google search.
One place to start is through transition to retirement. It should not just be financial. Start with reducing work hours to a nine-day fortnight, then four days a week, then three and if possible job share doing two days a week.
This provides a truer transition to retirement. It also provides extra income, enabling your super to last longer.
Some questions to ask to help those planning for retirement explore and develop their post-retirement identity are:
The answers will be different for everyone. But by starting to think about them, those approaching retirement can start to be better prepared. Start doing research, ask others about their experience and what they found that worked for them.
Research has found that working or volunteering during retirement can help stave off depression.
Perhaps the most difficult aspects of this stage in life is managing the self-examination questions that must be answered, such as “Who am I, now?”, “What is my purpose at this point?” and “Am I still useful in some capacity?”
Accordingly, we need to invest as much if not more time in social and psychological portfolio planning before retirement, to figure out what provides a sense of purpose.
Unfortunately, today too many in our industry have forgotten the fundamental of why we do what we do – for our members and investors’ total (not just their financial) well-being.
Paul O’Brien is the principal of Riskwise Professionals.
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