John Brogden

Research for the Financial Services Council released yesterday shows Australia has the third highest superannuation fund returns in the world.

The research was prepared for the FSC by Deloitte Access Economics to benchmark fees and returns to Australian superannuation funds against comparable countries.

“Of the twelve countries included in the study, Australia has the third highest returns,” John Brogden, CEO of the Financial Services Council said.

In his keynote speech to the FSC Annual Conference yesterday Mr Brogden said: “The (Murray) Inquiry has rightly asked how cheap or expensive the Australian superannuation system is when compared globally.”

New data from Chant West shows the median return since the start of compulsory superannuation 22 years ago to June 2014 was 8 per cent per annum which is 5.4 per cent above inflation. This is net of investment fees and tax and well above the typical return objective of CPI plus 3.5 per cent.

“On any measure this is definitive evidence that Australia’s superannuation system is working,” Mr Brogden said.

“The debate on fees is less definitive.”

The FSI interim report observed that there is a lack of competition and fee sensitivity in the superannuation sector and operating costs appear above international standards.

“The problem is that assumptions made to date been based on old data which has failed to compare like with like,” Mr Brogden said.

“We need to look at the cost and value of the superannuation system and the funds management industry,” Mr Brogden said.

“The returns that members receive from their superannuation funds over the long term are the most important factor. Focusing on cost alone is dangerous and lazy.”

Research conducted by Rice Warner Actuaries for the FSC shows that MySuper has had an immediate and significant impact on fees in default superannuation.

Superannuation fees have shown a steady decline over the past decade driven by greater competition.

The commencement of MySuper in July 2013 has had a dramatic impact on fees.

Between 2011 and 2013 fees in MySuper default-like products declined from 0.92 per cent to 0.73 per cent.

Given that 80 per cent of Australians default, this means the vast majority of Australians are receiving the benefit of MySuper immediately.

Mr Brogden said: “MySuper must be given time to deliver what the Cooper Review intended it to do − that is, lower costs through competition. And it needs to be given the opportunity to go further through reform of the way default superannuation funds are selected by the introduction of an open, competitive and transparent market.”

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The Financial Services Council’s annual conference is being held at the Cairns Convention Centre from 6 to 8 August. Further details can be accessed at: http://fsc.org.au/events/fsc-annual-conference-2014-accelerate/home.aspx

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Greg Cooper

Australia needs to significantly grow its financial services export industry over the next decade to ensure future employment and economic growth,  Greg Cooper, CEO of Schroder Investment Management Australia and chairman of the Financial Services Council said yesterday.

In his opening speech to the FSC’s annual conference in Cairns, Mr Cooper said: “Selling financial services to individuals or companies outside Australia is as much an export as selling iron or ore coal.”

“Financial services is no longer an industry that is seen just as a facilitator of growth in other sectors or as an industry to be regulated,” he said.

“This is recognised by the Murray Review which is the first inquiry into Australia’s financial system to consider financial services an industry that generates economic and employment growth in its own right.”

Mr Cooper also said: “Australia has the third largest pool of funds in the world at $2.3 trillion. As a result our funds management industry is large, highly developed and highly skilled.

“There is a tremendous opportunity to build upon our comparative advantage in this sector.”

“If Australia can increase its funds management exports to the same level as Hong Kong by 2023/24, the flow on effects will be significant.”

“As a result, GDP would increase by $4.2 billion by 2029-30 and around 10,000 additional jobs would be created.”

“There would also be significant flow on effects. Fees received by fund managers would lead to an increase in income and payroll tax and an increase in funds management exports would lead to a net increase in the amount of foreign assets invested in Australia,” he said.

The income generated by these assets would steadily increase tax revenue for the Australian Government.

“The Deloitte modelling shows the government would receive an additional $1.7 billion in tax revenue in 2024-25 which would stabilise to $1.2 billion in 2029-30 if Australian funds under management were increased to Hong Kong levels.”

These were some of the revelations in new research for the FSC by Deloitte Access Economics released at the FSC conference.

“The report shows around 3.5 per cent of funds under management in Australia are sourced offshore compared with 80 per cent in Singapore, and 65 per cent in Hong Kong,” Mr Cooper said.

“This is low compared to other leading financial centres.”

“It is clear from this research that a lack of coordination in international integration to increase the push to increase financial services exports has left Australia significantly lagging behind other countries.”

Mr Cooper also said: “Australia urgently requires a coordination body to be established to progress international financial integration and to promote Australian financial services in the Asia Region.”

“The City of London and the Hong Kong Financial Services Development Council provide templates which Australia can draw upon,” he said.

“The body should be resourced by government and must have power in legislation to deal with tax and regulatory issues affecting the industry.”

“And, for the body to be effective if must also have advisory representatives from industry and be housed in the Treasury portfolio,” Mr Cooper Said.

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The Financial Services Council’s annual conference is being held at the Cairns Convention Centre from 6 to 8 August. Further details can be accessed at: http://fsc.org.au/events/fsc-annual-conference-2014-accelerate/home.aspx

The post Australia needs to build a strong financial services export industry appeared first on AdviserVoice.