An increase in operational efficiency from the financial services sector that is being examined by the Cooper Review will not be the main driver in creating long-term wealth for Australians, according to Tyndall managing director Brett Himbury.
“The essence of phase two of the Cooper Review is how do we as an industry get the average costs down from 121 basis points down to something sub-100,” Himbury said.
“As a community, if we can help educate and fundamentally change the way investors go about making investment decisions, that will contribute a lot more than 21 basis points per annum to the net wealth of Australians,” he said.
Himbury highlighted greed and fear as the two most influential factors in an investor’s thought process and said they continually lead to dumb investment decisions being made.
“This in turn costs them wealth,” he said.
Himbury used the heavy reliance on the default investment options of superannuation funds by their members as an example of how significant the influence of fear is.
“As an example, 80 per cent of investors at this point in time are passive in terms of their default superannuation. We’d argue a lot of that is because they’re fearful as to what they need to do,” he said.
The situation results in most Australians allowing someone else to handle the second most significant investment decisions for them.
Greed has also led to a lot of people investing in asset classes they had no understanding of and as a result they lost significant amounts of money, Himbury said.
“These people, unfortunately, learned the hard way and they lost a lot of money – a lot more than 300 basis points per annum,” he said.
