A low-cost retirement savings environment brought about by the introduction of MySuper will not mean investment options will have to be compromised in the future, chair of the super system review Jeremy Cooper has said.
Concern was expressed by delegates at the Financial Services Council 2010 Annual Conference in Melbourne that a focus on reducing costs may force superannuation fund trustees to shy away from optimal investment strategies and the use of alternatives in a portfolio and that this may not be in the best interests of fund members.
“That’s not how it’s going to work. It’s all about planning for outcomes and then there are outcomes themselves, and we all know that in markets things don’t work according to plan,” Cooper said.
“It’s absolutely not about dumbing down investment strategies so that they’re all invested in cash or a low-cost investment option. That would be patently absurd,” he said.
“What it is about is focusing trustees on what we are here to do, what these various options are seeking to achieve for members. They need to be very open and clear about that and clear about how much they need to spend in relation to that.”
A fellow session panellist said the situation would place more emphasis on the role of advice in the process.
“I suspect there will be a lot of need for external advice from asset consultants and investment managers to get a better understanding of the permutations of the results they are given,” Corrs Chambers Westgarth financial services partner Michael Chaaya said.
Australian Unity Investments chief executive David Bryant thought the concentration on low-cost outcomes created a mismatch with the investment timeframe.
“You take the fees year in and year out and you have to make this assessment, but investment strategies are five, seven, and 10-year strategies. If you have a bad outcome this year doesn’t mean the trustees have set the fund on the wrong path,” he said.
This could again lead to trustees being encouraged to change strategies to the detriment of members, according to Bryant.
