Meet tomorrow’s chief retirement officer: The retirees’ champion
Australia has spent three decades building a world-class retirement savings system. As savers become spenders, our “money bus” threatens to stall. We are now being tested on meeting our purpose of delivering meaningful retirement outcomes. To serve two distinct customers – savers and spenders – our 30-year-old bus might need to be re-engineered into a modern, multi-carriage Metro.
The Conexus Institute’s* recent Review and Reflections paper tells us that three years since the Retirement Income Covenant was introduced we have made “patchy” progress. Furthermore, it predicts it could take another decade “to put in place high quality retirement income strategies.”
The paper cites ASIC as seeing “leaders and laggards”, while APRA found “one in five trustees cannot track the success of assistance to members.” Yet we have known about our aging demographic via Treasury’s intergenerational report for two decades.
So after three and 30 years are we there yet? As John McEnroe, the champion tennis retiree said: “You cannot be serious!”
Perhaps the better question is “who do we want guiding us next?” The retirees’ champion, the future chief retirement officer (CReO), is ready to jump into the driver’s seat.
A new era, a new leader
Our CReO’s team will guide retirees through their “Go-Go, Slow-Go and No-Go” phases with services that help navigate these stressful life periods. To avoid repeating the false starts of the past, our CReO, will take some key strategic questions to their board, including:
- Are we investing in a full-service retirement model – products; scalable services including advice and guidance; and the ongoing tech and operations supporting retirees over decades?
- Do we have the right organisational structure and skilled team to deliver?
- What regulatory frameworks will support success?
- How do we move faster to best serve our retirees?
The Four Rs: Realpolitik, Re-think, Re-build, and Re-serve
Realpolitik
In superannuation funds, like all money managers, the power usually rests with the fund’s fee generators. It’s the “show me the money” concept. Our CReO will “own” their retirees’ fees, ensuring they do better than just rehashing the same services members received in accumulation.
By reporting to the fund’s board, and by having their own business unit, the CReO will ensure retirees are properly served, and they be held accountable under the Financial Accountability Regime (FAR).
Re-think
Meanwhile, financial advisers, who can deliver a highly personalised service, are solving for their clients’ full circumstances and blending product options to balance income certainty and capital access. They are well-positioned to continue to move large member accounts to wealth platforms.
Are funds delivering on their intended purpose? The Grattan Institute thinks not. Retirees are “defaulted” into account-based pensions, exposing them to longevity risks. They often withdraw minimum incomes, underspend on lifestyle, and leave large unspent accounts.
Consumer research by ASIC and CoreData shows fewer than one in three pre-retirees feel reasonably prepared for retirement, while only two in five feel confident managing their retirement.
Tomorrow’s CReO must leverage super funds’ decades of goodwill by forging industry and regulatory consensus on best practice. They will replace simplistic defaults with blended income and capital access solutions. Retiree services will offer enhanced admin, guidance and personal advice, all scaled digitally with greater simplicity. Our CReO realises you can’t have your best retirement without advice.
Re-build
If Rethinking maps the strategic “tracks”, Rebuilding is about constructing the retirement “Metro”. With more than 100,000 new retirees every year looking for peace of mind in retirement, the regulators are rousing. They expect super funds to be far more competitive in their services.
The Conexus Institute’s proposed retirement licensing regime combined with Treasury’s forthcoming Retirement Best Practice Principles offers funds a clearer path. Funds would be required to demonstrate capabilities in advice, product design, and strong retiree engagement.
The CReO will rebuild comprehensive solutions across the fund’s product, investment and advice units, wrapping them into a seamless service that builds retiree confidence. Tech, talent and significant digital upgrades will be non-negotiable. They will build robust benchmarks and measurement processes to track retiree outcomes and publish annual scorecards.
Re-serve
Over the next three years, retiree members will demand a modern Metro-like experience: easily accessible, reliable, well-timed and priced for each phase of their retirement journey.
Retirees will be empowered. Consider Bec Wilson’s “epic retirement tick” collaboration with Chant West that will push funds to be “retirement-ready” with criteria such as education, digital advice, low-cost and simple retirement planning, budgeting tools, fast admin, and a well-trained contact centre.
With retirement-phase assets growing to more than $3 trillion in two decades, retirees won’t be left behind, they will switch to the Metro.
Is another benchmark needed?
In an industry used to jumping over the regulators’ benchmarks, let’s consider a measure such as a “Retiree Best Financial Security” or “Peace of Mind (POM)” test. We might blend Treasury’s and the regulator’s standards, with the Bec Wilson/Chant West criteria. This might be the only way to accelerate the changes needed.
Our future CReO will be the retirees’ champion, properly supported by the full resources of the fund, and with a direct board reporting line. Without a dedicated retirement business unit, the role risks becoming a “minister without a portfolio” situation, with no chance of the fund delivering on its true purpose of delivering income for a dignified retirement.
Supporting members when they retire requires that their fund deliver lifelong services, which in turn demand strong leadership, not just lip service.
Michael Swinsburg is managing partner at Alexander Hughes Executive Search and Leadership Advisory.
* The Conexus Institute is a not-for-profit think-tank philanthropically funded by Conexus Financial, the publisher Retirement Magazine.
