Despite a spate of “doomsday predictions” about the disruption of Australian superannuation, the structural realities of default superannuation make it difficult to imagine the emergence of a ‘GoogleSuper’, says Tria Investment Partners.
In the latest ‘Trialogue’ article, the consulting firm said it is important to understand that there are critical differences between superannuation and most other industries.
“In many industries, the most important factor for a competitor is the proportion of new buying decisions that they can capture,” said Tria.
For example, every time a consumer buys an airline ticket they make an entirely new decision about which airline to fly with. The same decision is made when people decide to choose a taxi service.
“Those decisions are independent of each other; you might select a different option on each occasion (albeit there is some customer loyalty),” said Tria.
Buying decisions about superannuation, on the other hand, are typically made once – often by an employer on behalf an employee – and sometimes for a lifetime, said the consultant.
“Or an individual chooses a fund one day, switching their balance across – effectively undoing their prior purchasing decision and transferring their value as a customer to a new provider,” said Tria.
But the amount of money changing hands in superannuation in any one given year is relatively small, said Tria.
“Only 4 per cent of superannuation assets moved from one fund to another last year. And with a net contribution rate of only 2.2 per cent for the system, that means a total of just 6.2 per cent of assets were up for grabs last year,” said the consultant.
That means that even if a “mythical new entrant” like Google appeared on the scene and managed to get 25 per cent of assets on the move, they would only steal 1.5 per cent of total superannuation assets, said Tria.
The effect wouldn’t be meaningless, but it certainly wouldn’t be disruptive, said Tria.
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