It would be hard to find a better time for the Australian arm of global PR colossus, Edelman, to launch its 2019 Trust Barometer findings, especially for its current and prospective clients in the financial services sector.
Coming on the back of the Hayne Royal Commission and earlier Productivity Commission recommendations, the superannuation sector has been right in the spotlight and, in particular, what future direction policy makers and the industry should take with respect to default funds in workplaces.
For international readers (I am making the heroic assumption I have some), default funds are those nominated by employers or named in award or workplace agreements as the superannuation (pension) funds into which employers pay mandatory contributions on behalf of employees.
I don’t intend to dwell on the various options posed by politicians, commissioners and industry stakeholders are posing. They are already well documented. However, the 2019 Trust Barometer report adds a new dimension to the discussion, identifying that ‘my employer’ is one of the most trusted relationships in the lives of 77% of Australians.
I admit, the number surprised me given the revelations of misconduct in some of the major financial services businesses in Australia, some of the largest institutions in Australia. Nonetheless, we have to take the finding at face value.
For those not dictated to by industry awards and enterprise agreements, the majority of Australian employers are responsible for nominating a preferred default superannuation fund for their workplace, their employees. For major employers, this is often outsourced to specialist industry tender consultants. For smaller enterprises, it could come down to choosing the latest fund to advertise on television. In short, there’s any number of ways of selecting and nominating a fund.
In the mix of the current debate is how over the years hundreds of thousands of Australians have ended up in sub-standard super funds through this process. At the bottom end of the scale, it’s not hard to work out. With over 200 funds to choose from, an unadvised employer will struggle to choose.
At the top end of town, however, there is plenty of scuttlebutt circulating again about how choosing a fund has been part of a broader mix of commercial considerations, such as more favourable terms on commercial loans. The evidence of this is hard, almost impossible to produce, but anecdotes about it have rumbled through industry circles for over a decade.
If true, it’s clear that decisions have not necessarily been based on the best interest of employees and achieving the best possible financial outcomes for them.
In the wake of the Royal Commission and Productivity Commission recommendations that are setting the superannuation industry conversation for 2019, a substantial number of employers are reconsidering their default fund nominations. It is most likely an early indicator of a coming mass exodus from mostly the commercial superannuation funds into the not-for-profit, or industry fund sector.
What the Edelman Trust Barometer highlights is the level of faith employees will be placing on their employer to get the next decision right - a layer of accountability and responsibility that may not have been appreciated in the past.
Funds focused on delivering the best possible retirement outcomes for members through consistently solid investment performance and the support and advice that enable members to make better financial decisions should end up being the default funds for more employers than ever before.
Let’s hope so for the sake of employees who are looking to their employers to make decisions that will help steer them towards a more prosperous future.