As the first of the Baby Boomers turn 65 this year, Australia’s superannuation industry has begun shifting its focus away from the impending Stronger Super reforms to contemplate a newer, slower moving challenge – stemming the potential outflow of retiree dollars.
The Boomers are a much analysed generation, representing significant net worth and a large chunk of Australia’s $1.4 trillion superannuation pool. Just like the friend you don’t miss until they are gone, the full worth of this group is only now coming into sharp refrain. With retirement looming, the potential threat of a wholesale withdrawal ‘boom’ from super becomes a distinct proposition.
It is not as though the industry has had little time to act. Impending Boomer retirees have been on our long distance radar for years. We even have clever one liners to describe the phenomenon. The classic line, repeated often by the commentariat, describes the Boomer cohort as a proverbial ‘pig in the python’ – a none-too-subtle reference to the slow moving mass, making its way through life’s pipe.
The pig may be slow, but, it appears to be nearing the business end of its journey.
What the ‘pig’ does after its passage into the ‘pension’ phase is the topic of much conjecture. Enter actuarial forecasters Rice Warner, bringing some science to the debate as part of a recent policy discussion in Canberra.
Despite the big numbers, as policy issues go, it’s a pretty dry topic. Winning traction from industry to grind out the needs of post-accumulators is not an easy task at the best of times. And given all that sits on the industry’s collective regulatory reform plate, this one sits very much in the policy ‘backburner’ category.
But it was pressing enough to attract around 60 industry leaders and officials, including keynote speaker, the Shadow Minister for Superannuation, Mathias Cormann .
What they heard was some deeper analysis about several key issues:
It’s this third point that should strike the deepest note of concern for the wealth management and super industry.
As Rice Warner points out, the demographic issue demands more than simply creating a bland pension product response. It requires a fundamental re-think by funds about the strategic role, if any, they might play for their members during retirement.
But what does this really mean for funds looking to stem the flow of FUM and hang on to their members (and profits) in retirement. What else is required?
Some of the top line answers that emerged were these:
In other words, Boomers are looking for different things, to be engaged on a different level, and funds that fail to understand this will do so at their peril. Boomers are all about yield, about drawdowns and about longevity … and they are looking for targeted advice along the way.
So ultimately, what does all this mean?
It means that, as is so often the case, it’s all about good communication: communication between funds and their Boomer members, and communication between funds and advisers.
Like it or not, the pension phase is upon us, and funds that can’t respond with flexible products and targeted communication risk missing out on a whole new chapter in Australia’s superannuation story.
