Mercer is urging superannuation funds to become more focused on outcome based investment strategies and be more proactive in reviewing their post-retirement offerings in 2016.
Mercer’s paper – Top Ten Actions for Superannuation Providers in 2016 – warns super funds that 2015 saw the turning point for investors following three years of strong market returns and 2016 will continue to see volatility; now is the time to shift the dial in terms of investment strategies having a stronger focus on individual members with tailored asset allocations based on demographics.
Mercer’s director of strategic research, Hendrie Koster, said, “Many super investment strategies still assume all members have the same investment objectives and therefore invest in the same way regardless of the members’ specific needs; this approach will have to change in 2016.”
“Investment strategies should be flexible and tailored to the specific needs of each member, including their balance, gender and objectives. Funds need to focus on more outcome based investing to ensure that their members achieve an adequate and sustainable level of income in retirement,” he said.
The design and positioning of post-retirement solutions should be given particular attention by super funds in 2016 according to Mercer.
“Action from the industry to provide retirees with a flexible income solution that provides an adequate and sustainable income for their retired life also remains a top priority,” said Mr Koster.
“Post-retirement has certainly moved up the priority list for the industry as a whole, but the market is still immature and the range of solutions is thin. We hope to see a strong increase in the number of tailor-made post-retirement offerings that have so far been limited in the absence of clear government guidance.
“Super providers need to be on the front foot, anticipating potential changes so they are well positioned to respond to any changes in legislation.
“Unfortunately market volatility is expected to continue throughout 2016, we’ve already experienced a particularly rocky start to year. Despite many sources of uncertainty in the economic and political environment, we see potential for interesting investment opportunities; there are few excuses for complacency. Low yields and heightened volatility make risk management more important than ever,” Mr Koster said.
- Focus on outcome based investing
- Prepare for potential changes to super tax
- Post-retirement continues to be a focus
- Re-define objectives in a volatile world
- A time to tilt portfolios to alpha
- Reflect on governance and beliefs
- Board evolution: Structure and diversity
- Build a sustainable strategy for the future
- Technology changing the face of consulting
- Reduce operational and implementation inefficiencies
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset—their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com.au Follow Mercer on Twitter @MercerAu