EDITORIAL

YFYS – good improvement, but more is possible

The announced changes to the YFYS performance test are positive for consumers. The inclusion of admin fees transforms the performance test into a consumer outcome test, while including additional unlisted asset indices means the test won’t overly constrain funds from constructing portfolios in members’ best interests.

It is reassuring when government and policymakers respond to feedback. Hats off to them given the challenging situation they face: a superannuation system which is extraordinarily complex and interactive, accompanied by strong agency issues which make it hard to distinguish between research and lobbying.

As much as we want to move on from YFYS (to areas such as retirement and advice) there is more work to be done. We are particularly focused on the stapling model, the performance test, and how they interact.

Stapling protects consumers from the cost of multiple accounts – it should have been fixed years ago. We are exploring whether the YFYS approach is the best possible model. It is also worth reflecting that consumers will be quasi-stapled to a super fund’s retirement solutions, an important area where we expect significant dispersion amongst funds.

Despite the announced enhancements the performance test can be further improved. It remains risk agnostic and ignores the impact of asset allocation decisions.

We are further investigating how the separate reforms interact and the ordering of their implementation. Here for example, we are exploring issues such as the appropriateness of stapling consumers to funds which fail the performance test.

We believe the Government’s intentions are positive and focused on improving consumer outcomes. It clearly is a difficult area for policy design. Let’s be constructive, respectful and keep consumer outcomes front-of-mind. There remains the opportunity for a better solution.

I am thrilled to be hiring two high profile and high integrity people who have played a significant role in supporting the networks which have underpinned many of the good developments in the super and institutional investment sectors.

Whist Conexus through its forums and published content will continue to educate and support the industry, I’d also highlight that we act with the purpose of promoting a better retirement system for consumers. Some policy and industry changes will be necessary to achieve these outcomes. However, in such a complex system the risk of policy mistakes is elevated. We will continue to advocate for what we believe will deliver best consumer outcomes.

We aim to continue to be an effective catalyst for positive change and expect these and future new hires will help us along our journey. 

Colin Tate, chief executive, Conexus Financial