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The Transparent Future of Super

Wednesday 17 May 2017

At the ASIC Forum this year, there was concern expressed about the apathetic attitude Australian have towards their superannuation funds, and how superfunds have been investing their money.

Thus, the questions posed dealt with whether this disengagement was the result of consumers making little effort to be engaged, or is it instead due to the way superfunds themselves are managed?

On Spaceship’s blog, The Dish, Hayden Bleasel, Head of Product, wrote that:
This technique works because they rely on financial illiteracy. To the average consumer, funds are compared
 solely on their fees rather than the net return of the portfolio. The result is people bragging that their super fund has the lowest fees even if it’s returning 4% per annum.

At a talk held at Stone & Chalk, entitled, The Future of Super, Spaceship CEO Paul Bennetts challenged that it was the fund manager’s lack of interaction with public that has driven this disengagement.

“My view is that we are not disengaged from our super,” he said. “Our super is disengaged from us.”

Bennetts asked whether super fund managers should actually be keeping superfund holders abreast of what is happening with those contributions and how they are being invested.

In addition to this, Jeremy Cooper, Retirement Income Chairman at Challenger Limited, added that he conducted a review of a superannuation system in 2010 and found that one of the things that was largely lacking is ‘systematic transparency.’ 
Speaking about the Cooper Review, Bennetts said it recommended that fund manager should disclose their portfolio holdings on a monthly basis. “We should know what our top five holdings are,” he said. “We should know what our top ten holdings are.”

Australian Securities Investments Commission (ASIC) Chairman, Greg Medcraft, spoke about fintechs, highlighting their ability to take advantage of the gap between consumer expectation and the common practices of incumbents. Bennetts agreed that, unlike the incumbents, fintechs are relationship-focussed but added they are also under-capitalised and struggle with licensing.

Despite the existence of ASIC’s innovation hub and Regulatory sandbox, Bennetts was still calling for a ‘sandpit’.

Similarly, at the ASIC Forum, Danielle Szetho, CEO of Fintech Australia, also expressed some dissatisfaction with what was being done for fintechs in  Australia, suggesting that there were still limitations as to who would be allowed to enter the regulatory sandbox.

Consumer data as asset
Though Bennetts did not explicitly refer to this in his address, the conversation around greater transparency is a perennial one that moves hand-in-hand with the rise of fintech start-ups that have been advocating for access to the data being held by financial incumbents.

Certainly, the issue of consumers’ rights to access their data has been cropping up more and more as the fintech industry develops, and the concept of open application programming interfaces (API)s is no longer so far-fetched.

The creation of a platform that creates that kind transparency sets the standard for fintechs operating in all facets of the financial services industry.

The wider implications
The growth of fintechs challenges the heavy politicisation of the notion of innovation and disruption. Further to this, at a separate event, also held at Stone and Chalk and entitled, The Future of Innovation, Shadow Treasurer, Chris Bowen, addressed this need for there to be sustainable future.

For incumbents, who are trying to make themselves more competitive either by disrupting their usual methods or by partnering with Fintechs, this means they must keep an eye on political risk, since it can have implications for the types compliance frameworks required to satisfy regulators.

Seamless or fragmented?
For fintechs that deliver a limited range of products, this might mean the consumer would need to do business with array of small fintech start-ups, requiring their data to be shared across a range of platforms.

In many ways, this forms one of the arguments for APIs—that is, allowing small fintechs to access the incumbents’ data to provide consumers with a seamless experience, instead of having to jump from one place to another.

However, if consumers are dealing with multiple fintechs offering a limited range of products, would this not force them to continue that fragmented experience of financial products and services?

Will there be an overarching platform uniting fintech products so consumers can have that seamless experiences?

Does having your data split across many different platforms amount to a security risk? If there is a breach, who is liable?