Low consumer confidence leads decline in superannuation

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CEOs questioned in the FSC survey report 2012 said financial advisers need to change their approach to get clients interested in superannuation and other retirement options.

The leaders said the lack of interest in additional superannuation contributions could come from five main issues:

  • The complexity of the superannuation system
  • The large number of rule changes in the system
  • The instability in global financial markets in recent years
  • The performance of key economies eg. US and Europe
  • Low returns generated by superannuation recently

Advisers could combat this trend by taking a final outcome focus rather than return targets, according to the CEOs.

‘Show people the living standards they can expect if they have no superannuation; just have the compulsory component; or put in some personal contributions as well,’ the report stated.

The lack of communication around the financial services industry was also seen as a big concern, leading to low consumer confidence and a trend towards SMSFs.

Suggestions to combat this included – improving financial education and literacy, and improving tax advantages of voluntary superannuation contributions.

SMSFs could also be an opportunity for advisers to create professionally constructed investment products for those clients.

The CEOs said the ‘standard’funds management portfolio of 30/70 would no longer deliver returns and would need to change, with funds inevitably being invested internationally.

The introduction of new regulations was seen as a large inhibitor of consumer confidence and 44% of CEOs believed it would decrease the amount of Australians seeking financial advice.

In summary, the CEOs believed retirement savings could be increased by:

  • An increase in communication around the financial services sector
  • A change in portfolio mix
  • A focus towards final outcome rather than return targets
  • SMSF focused investment products
  • Improving tax advantages of voluntary contributions

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