Did you know that Aussies are paying $2.6 billion extra a year because of unintended multiple superannuation accounts? That’s $1.9 billion in excess insurance premiums, and $690 million in excess administration fees. It’s a fact, the Productivity Commission made this estimate recently.
While the press surrounding this number focussed on the finance industry itself, and ran headlines like “the greatest financial scam”, I believe this statistic is evidence of so much more.
It means that Australians are, by and large, unengaged with their superannuation. It means that they don’t understand it, that it is easier to ignore it, and that savings for the future are not valued because it is not accessible.
This is the biggest shame of all. Because if there’s one thing I have learned about money, it’s that you need to take responsibility for it yourself. You don’t have to have the skills of a financial planner or a fund manager, but you do have to be accountable to what you spend, what you save, and your retirement plan.
I spend a lot of my time talking to financial planners about how to reach people with this important message. I spend an equal amount of time talking to Australians about how to engage with advice and investing. Because I believe both are equally important.
The industry alone cannot lead the horse to water if it doesn't want to drink. Similarly, financial advisers can’t expect people to value their services when many don’t understand what they can do for them.
I do believe that super funds need to get far more creative about how they engage people with their message. The nest egg is most likely the most important component to combating the frightening statistic that up to 80 per cent of Generation X are looking likely to fall short of a comfortable retirement. And the more I read about the millennial prospects for home ownership being as low as one-in-five, the more I believe that superannuation could be the singularly most important wealth vehicle for Australians moving forward.
A ‘getting back to basics’ message is apparently needed, as demonstrated by the massive numbers quoted above. Check your balances, consolidate your accounts and have the right insurance in place. While it’s not the most exciting of messages, it could be one of the more important lessons people. Because doing nothing is definitely damaging.
Until next time
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.
19 July, 2016
A long-term vision is needed for both India and Australia to propel their financial services industries forward and to achieve excellence.
20 September, 2018
Here's what it means for the professionalisation of the industry.