Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 21

Supersize and individual reporting for members

Financial institutions have for centuries put great store on ‘bigger means better’. In the early days of banking, this was manifest in the size of stone façades, vaults and ceiling height. In the explosion of life insurance companies in the 1960’s, it was to be the tallest building in town.

Now that superannuation holds the greatest sway with savings, it’s a bit more difficult for these new standalone institutions to make a great show of size. Most services are outsourced and direct employee numbers and operating revenues are small. It’s hard to justify that skyscraper.

So what should these supersize funds be doing to demonstrate the greater capacity they have to do more for members – individually?

It should be so simple. They should provide a calculation of a member’s actual average return over their period of membership based on their own cash flow of contributions and fees experienced. Technically, this is an internal rate of return. Not fund averages, not generalisations about all the members, but individual reporting, preferably in real terms.

The main metric currently focused on in advertisements by these funds seems to be around expense ratios. This is meaningful to individual members and worth being highlighted as a competitive advantage. A typical promotion of this advantage might be something along the lines of “if you pay an extra 1% each year in fees, you could lose up to 20% from your retirement benefit over 30 years”. Will these funds actually calculate individually for a 30 year member what their actual compound average fee percentage has been? They certainly have the data and technology to do this but I’m unaware of anyone doing this.

More importantly, will these funds be progressively calculating the actual investment return the member has earned over their 30 years of membership (as an internal rate of return) on their contributions? They could easily do this with the ‘big data’ and ‘big technology’ achieved by size. Just as easy to do would be the equivalent average inflation rate so that ‘real return’ would be readily available as well.

The individual calculation of average return and real return over total membership period is the missing ingredient in educating members individually from their own experience. By becoming more familiar with the stability of average returns over the long-term membership period, members can learn to avoid knee-jerk reactions to stock market gyrations which generally see them move out of long term strategies at the worst time and never return.

This information would also help financial advisers in delving deeper into finessing long term strategies for the member in the context of their own experience, knowing that the member can be expected to have a more rational future behaviour within assumed risk profile.

So how might the ‘supersize’ fund promote the benefit of their new individually targeted real return reporting. Something like:

If you join our fund we will provide you with actual lifetime reporting of your long term returns, after inflation and fees. With this personally targeted information you can be learning about long term investing from your own actual experience. This on demand calculation service will also assist your financial adviser in evaluating long term investment strategies for you based on your own experience. For example, if you do not develop sufficient knowledge to keep to long investment strategies, a 2% pa lower average return could lose up to 30% from your retirement benefit over 30 years.”

Whilst superannuation funds put great store on generic glossy reports and newsletters to educate members, there’s nothing like the impact of an individual learning from the university of life. Best to start doing this education when balances are small.

 

Bruce Gregor is an actuary and demographic researcher at Financial Demographics and established the website www.findem.com.au.

 


 

Leave a Comment:

RELATED ARTICLES

Get real: how we delude ourselves about investments

Financial education and thanks to Noel Whittaker

Do clients understand what advisers are saying?

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 628

Australian investors have been pouring money into US stocks this year, just as they start to underperform the rest of the world. Is this a sign of things to come? This looks at 50 years of data to see what happens next.

  • 11 September 2025
Exchange traded products

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement

We need a better scheme to help superannuation victims

The Compensation Scheme of Last Resort fails families hit by First Guardian and Shield losses, as well as advisers who are being wrongly blamed for the saga. It’s time for a fair, faster, universal super levy solution.

Investment strategies

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Economy

How bread vs rice moulded history

Does a country's staple crop decide elements of its destiny? The second order effects of being a wheat or rice growing country could explain big differences in culture, societal norms and economic development.

Investment strategies

Small caps are catching fire - for good reason

Small caps just crashed the party like John McClane did in the movie, Die Hard - August delivered explosive gains. With valuations at historic lows, long-term investors could be set for a sequel worth watching.

Defensive growth for an age of deglobalisation, debt and disorder

Today’s new world order appears likely to lead to a lower return, higher risk investment environment. But this asset class looks especially well placed to survive, thrive, and deliver attractive returns to investors.

Economy

Will we choose a four-day working week?

The allure of a four-day week reflects a yearning for more balance in our lives. Yet the reliability of studies touting a lift in productivity is questionable and society may not be ready for such a shift anyway.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.