Industry funds must work together to increase services and reduce fees until wealth management becomes unprofitable for the big banks, argues Sunsuper’s chief executive.
Speaking at an Australian Institute of Superannuation Trustees luncheon in Sydney, Sunsuper chief executive Scott Hartley said there is “clearly a lack of trust in the banks”.
“They keep shooting themselves in the foot – in the head, quite frankly – with trust issues, particularly on the wealth side of things,” Mr Hartley said.
The banks make a “lot more money” out of banking than they do out of wealth – something he admitted is the industry fund sector’s “saviour”.
While Westpac has committed heavily to investment technology via BT's Panorama platform, the rest of the banks have been “pretty backward” when it comes to wealth management, Mr Hartley said.
“As long as we can keep the services improving whilst maintaining reduced fees … then the banks will eventually see that the opportunity to make money out of superannuation is going to be reducing further and further,” he said.
The banks’ return on investment for putting money into superannuation capabilities will be much lower than the corresponding investments in banking capabilities, Mr Hartley said.
But industry funds must ensure they maintain their focus on efficiency as well as increasing services at the same time, he said.
“It’s no good being cheap and cheerful. You’ve got to have a good level of service as well as low cost,” Mr Hartley said.
Commenting on the weakness of the banks, he said “they are incredibly bad at executing on big change and being focused”.
“They waste money and they spend lots of money. They blow up hundreds of millions of dollars all the time,” Mr Hartley said.
“On the industry fund/not-for-profit side, there is much more focus on every dollar we’re spending – [we ask,] are we doing that in the best interests of members? Not having to find that shareholder margin is incredibly powerful,” he said.
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