At a recent self-managed superannuation (SMSF) event, SMSF expert Grant Abbott predicted the time would come when two equally powerful groups dominated the financial services industry.
Quoting statistics from consulting firm Deloitte, Abbott said that in the long term, industry superannuation funds and SMSFs would be the two main players in financial services.
He said SMSFs would continue to flourish, given Australians’ natural tendency to want to take better control of their retirement.
And given that industry fund boards are half governed by union representatives, he said superannuation had emerged as a power base for unions.
“They may have not succeeded in winning over people in the workplace, but through superannuation, unions will have greater control over national investments, especially as I believe industry funds will be one of the main players in our industry,” he said.
According to Deloitte, industry funds were expected to grow by 12 per cent by 2028, while SMSFs would grow by 12.5 per cent. In comparison, retail personal superannuation will grow by 9.5 per cent, while retail employer superannuation will increase by 9.8 per cent.
Deloitte attributed the growth of industry funds to the workplace, in a sense echoing Abbott’s comments about superannuation in the workplace.
“Industry funds are increasingly the first super funds for Australians entering the workforce,” Deloitte said.
SMSFs, on the other hand, have accountants to thank for their sustained strong growth.
Deloitte said the growth behind SMSFs was due to the “support of many advisers and accountants”.
The two groups certainly look set to benefit from current government legislation and market conditions.
It was a theme picked up at the recent Investment and Financial Services Association (IFSA) conference.
Colonial First State chief executive Brian Bissaker spoke about people’s ultimate preference to manage their own money, a sentiment that has fuelled the growth of SMSFs.
Indeed, the Deloitte figures showed that when markets fell, the number of SMSFs rose.
The IFSA conference also highlighted the growing concern about the government’s intra-fund advice initiative, particularly as some industry insiders believe it will benefit only some groups.
Under the intra-fund advice policy, superannuation funds can provide limited and single-issue advice to members.
For Tower chief executive Jim Minto, intra-fund advice would allow industry funds to be the dominant distributors of life insurance.
Predictions are always a part of industry dialogue. For outgoing IFSA chief Richard Gilbert, anyone who predicted just two players would dominate Australia’s financial services industry was a “doomsayer”.
“If these doomsayers are correct in believing that these two groups will be the only dominant players in our industry, then it would be very negative for Australia,” Gilbert said.
“Australia would be the only country in the OECD world with an economy where highly-capitalised and well-branded institutions don’t have a dominant role.”
He said big brands would always resonate with people when it came to their retirement savings and many SMSFs were already involved with the “big brands”.
For Gilbert, however, the current line-up of default funds in Australia’s award system was the key issue for the “doomsayers”.
In another piece of government legislation that is set to favour industry funds, currently 12 not-for-profit super funds are in the default fund award system, effectively shutting out the retail sector.
“Before these doomsayers go out predicting anything, they should be looking at how this affects competition. That is the real issue for the doomsayers,” Gilbert said.
