When a frog is put into a pot of water waiting to boil, it is oblivious to the rising heat until it is too late and the water is actually boiling.
It was a phenomenon of nature repeated throughout society and businesses, including superannuation funds, according to former Australia Post chief executive and now business consultant and St George board member Linda Nicholls
Water seems to take a long time to boil and then it seems to boil fast suddenly.
In the same way, a financial crisis doesn’t just happen upon us. There is a gradual build up of heat.
The growth and prosperity of the years leading up to the financial crisis were so pleasant that people did not notice the world getting hotter, Nicholls told delegates at the Fund Executive Association conference in Melbourne last week.
As the water got hotter, people luxuriated in their greed when they should have jumped out of the pot, she said.
The 17 years of growth coincided with the foundation of compulsory super in 1992.
The superannuation fund industry now has to face whether it will go the way of boiled frogs or rise to the challenges now upon us all.
The paradigms we had become so used to were no longer relevant to the superannuation industry and needed to be changed, Nicholls said.
The first incorrect paradigm is that industry funds are there only to benefit members. This is no longer strictly true.
Today all funds need access to capital to compete in the fierce market. They need to be involved in marketing, advertising and member communication.
The second incorrect paradigm is that members understand risk. Of course, this has been proven false with the number of people who invested in Storm, Great Southern and Timbercorp.
Nicholls was the final speaker at the conference and highlighted the risks super funds continue to face, although she did admit funds were somewhat protected by the inaction of members.
Likening it to hotels not caring that none of their guests ever finds the mini-bars to be good value and banks that garner all sorts of complaints from customers but rarely lose any, she said super funds were renowned for their slow trail of paperwork, yet people still did not leave funds.
Is it a given that this environment will never change or is it time to feel the water becoming warmer and prepare to jump out of current behaviour?
This might be good news according to fellow conference speaker Sajayit Das, who said he believed we had not yet reached the financial Armageddon we were heading towards.
But despite his harsh views, according to demographer Bernard Salt, who also spoke, Australians had already decided the recession was over and had started spending again.
Will this be enough to help us survive and prosper or are there just more boiling frogs in the pot? Only time will tell.
