Australia's for-profit retirement-savings plans, whose reputations were battered by an inquiry into financial industry misconduct, will emerge stronger and more competitive after restructuring their businesses. But it will take time.
That's the view of industry executives who spoke Thursday at a Bloomberg Buy-Side Forum in Sydney that explored the future of the superannuation industry.
"Never count the retail sector out," said Sally Loane, chief executive of the Financial Services Council, an industry lobby group. "They will come back in a competitive fashion," helped by their ability to innovate, she said.
For-profit wealth managers such as AMP and IOOF Holdings have been targeted by regulators after the Royal Commission exposed a litany of wrongdoing across the industry, including charging fees for services they didn't provide. AMP's wealth management unit has been hit by an investor exodus, with A$1.8 billion ($1.3 billion) of net cash outflows in the three months to March 31, adding to A$3.97 billion of outflows last year.
Australia's not-for-profit funds, meanwhile, have been making hay. AustralianSuper, the nation's largest pension fund, had inflows of A$1.3 billion between December and February from people shifting from other firms — about two-thirds of which was from AMP or bank-owned funds.
The retail funds are down, but not out, according to Ben Walsh, CEO of Mercer Australia.
"When those funds step off the operating table they will be stronger than when they went into hospital in the first place," he said. "Whether it is a year or two or a little longer, we will have to see."
While retail funds will look different and possibly be "missing limbs" once they emerge from restructuring, they "can still play an important role in the industry," said Scott Hartley, CEO of Sunsuper, a A$66 billion not-for-profit superannuation fund.
"But if they are not competitive delivering member outcomes, they won't be successful," he said.
