Transcript Super Informed Radio episode 16

Super Informed Radio episode #16: Would you trust your colleagues with your super?

June 2018

Disclaimer: What you're about to read is of a general nature and doesn't take into account your personal financial situation, needs or objectives. We recommend you seek financial advice before making any decisions about your super and consider the relevant UniSuper product disclosure statement.

Rob: Hello, and welcome back to another episode of Super Informed Radio, the podcast where we help you wade through the complexities of super and the broader world of finance. As usual, I'm Rob.

Lyndon: I'm Lyndon.

Marta: And I'm Marta. So, guys, this might be a bit biased because of what we do, but where do you get your financial info from? And by financial info, I actually mean super info.

Lyndon: I would probably research it myself, but I guess researching it myself means talking to people in the know, who are the people I work with every day. So, I don't know. I guess I just ask around the people that are in my network, I guess, is the short answer. How about you, Rob?

Rob: Yeah, look, I like to read up on what's happening in the news when it's super-related, so definitely through media, but also ask around. Why do you ask, Marta?

Marta: You're not gonna ask me about what I do?

Lyndon: Sorry.

Rob: Where do you get your info on super?

Marta: I don't really talk to people about it. I tend to just fossick around for information on my own. I think having worked in sort of finance for a little while now, I kind of understand the more complex bits and bobs, and I can kind of strike out on my own.

I ask because according to some research that I came across recently, Australians' superannuation investment decisions are, for the most part, influenced by the people we work with. The research was actually done by some UniSuper members, which was very interesting.

Rob: Yeah, indeed. So to help us unpack this finding a little bit more, we talked to a couple of UniSuper members, Dr. Carly Moulang from Monash University and Professor Paul Gerrans from the University of Western Australia. So I believe you, Marta, and you, Lyndon, got to chat to them a little earlier.

Lyndon: We certainly did.

Rob: Should we have a listen?

Lyndon: Let's do it.

Marta: Let's check it out.

Marta: So, Carly and Paul, thanks so much for joining us this morning. We're really pleased to have you guys here.

Dr. Moulang: It's a pleasure.

Prof. Gerrans: Thank you. Pleasure.

Marta: So before we kick off, can you both go into a little bit of detail of what you do?

Dr. Moulang: Okay. My name's Carly Moulang. I'm a senior lecturer in the Department of Accounting in the Monash Business School. And my research is a combination of management accounting, behavioral finance, and superannuation-based research. And underlying a lot of my research is my passion and interest for our psychology, so psychological-based researched.

Lyndon: Cool. And Paul?

Prof. Gerrans: Paul Gerrans, I'm at the UWA Business School at the University of Western Australia. I guess I've got two main interests research-wise. I'm interested in financial literacy and retirement savings or, more specifically, in Australian super.

So in financial literacy, I'm interested in how we acquire it, and in particular, how adolescents acquire it. And I'm also interested in how that depreciates within the context of cognitive decline. And in terms of retirement savings, I'm interested in all the manner of choices that people make, so investment strategy, savings levels, choice of funds, and so on.

Marta: Now, before we go on, I have to ask, why super? I mean, it's not everyone's number one... Let's face it. It's not everyone's number one topic of choice. So what drove both your interests into this space?

Dr. Moulang: For me personally, I sort of fell into the superannuation research by given an opportunity to be involved in this large superannuation-based project. And I could see that there was opportunity to do behavioral research in that space.

And so I was really interested in the behavioral aspects, and I thought, "Well, this is a really interesting and relevant context to do behavioral-based research." And it's just so happened that it's come at a really good time when there's lots of interest in our work, such as this podcast and other sorts of interests.

So I think that we're being really lucky to be able to do behavioral research in this space.

Lyndon: And so some of your work suggests that people are more influenced by their peers, Carly, when it comes to making investment decisions related to their super. Why do you think that is, or what has your research found about that?

Dr. Moulang: Well, I think that for some of us our peers can be a really good reference point for where we can make social comparisons between our behavior, and in this case, how we think we should be investing with our superannuation.

So, for example, our peers could be people that we seem to deem as being similar to us in some respects. So we might look at them to help alleviate some of the uncertainty that we can often feel when making the complex decisions that are underlying superannuation.

So I think that we can use our peers as a reference point and get a sense of what the normality of behavior might be in regards to superannuation. And there's also an element of social learning there as well.

So if we observe, for instance, that our peers are making some type of investment strategy change, then it might be likely to help impact our decisions about how we invest our superannuation, for instance. And what we find in our study is that a person's likelihood of making an investment strategy change is positively associated to the activity in their Sub-Plan.

So if the peers in your Sub-Plan engage in a lot of activity, then it's likely that you're also going to engage in activities involved with your superannuation account.

Lyndon: And so does that kind of correlate to, say, for example, a member decides to switch into some higher-risk options and their coworker goes, "I'll do that, too"? Is it the same for, like, higher risk and lower risk? Do you go into that level of...

Dr. Moulang: Paul, would you like to answer that one?

Prof. Gerrans: We didn't go into the level of risk. We possibly will explore that, but we left it, I guess, in part, due to the makeup of the sample that we had. We didn't explore into the particular risk level.

Just in terms of the, you know, question... So I guess in our research, we're not necessarily looking at the question of who is more influential. So we're looking at just the role of peers. So we're not looking at whether they are more influential than, say, professional advice or whether they're more influential than a partner and so on. And I guess we do have some prior evidence outside of our particular research on that.

I guess we know that a majority of Australians don't receive professional advice. And I guess, you know, there's a whole lot of research which investigates that, and it's to do with perhaps cost, price, and to do with trust. And I guess the trust element is getting underscored with the whole commission at the moment.

But we also do know... Carly touched on the role of social norms. And I had a former Ph.D. student who investigated social norms and looked at, I guess, the hierarchy of who was more influential in terms of looking to social norms. And so there, I'm looking at people, like what we've looked at, work colleagues and whether it be a partner or whether it be your employer. And it was interesting in the work of one of my students, he had identified that work colleagues were a role or did have a role but they weren't the most influential.

And in fact, in most cases, the partner was an influential source of influence when it came to forming intentions to do things, so whether they're forming an intention to save more or forming an intention to change investment strategy.

Lyndon: And speaking of influence, does the gender makeup of a workplace have an influence, perhaps, in how people make super investment decisions?

Prof. Gerrans: We did see some difference by the composition of the workplace. It's a little hard for us to be definitive. It seemed to be... I guess the one that was more supported by the data was when we looked at a male member of the Sub-Plans in our particular case, if those males were in a workplace where there was a lot more males, the likelihood increased that they would in fact make a change.

And there was some evidence supporting the other way. Women in Sub-Plans where there are a lot of men, the gender effect, there's a lower likelihood of a female member making a change, but that gender effect widened but... It was as much that males were more likely to do something and perhaps less that females were less likely. So my sense is we're not as definitive as we perhaps would wanna be on, I guess, that specific question.

Marta: Do balance amounts or the amount that people have in their super influence their decisions more? Like, would they compare with their peers or try to aspire to be like someone else? Has your research delved into that at all?

Dr. Moulang: I guess not specifically. Like, we did use account balance as a control variable in our study. But there is certainly some evidence that having higher account balances, those individuals are more inclined to seek advice. Paul has a paper specifically on this. Did you want to talk about that a bit, Paul?

Prof. Gerrans: We've looked at... I guess as you might expect, that those with higher balances are going to be the ones who're going to be more inclined to go out. They've got more at stake, so they're perhaps gonna go out and seek more information. I mean, we know in our data that when it comes to people making changes, sort of like within UniSuper, a member can make a change through their existing balance or they can make a change to their future contributions. We know there that just in terms of doing things, balance, it's all gonna be related. If people are going to change to their existing balance, that's more likely if they've got more money, they've got a bigger balance. But we know that when it comes to making changes to contributions, it's in fact more driven by the current income or how much contributions they're putting in. And in fact, it's more likely to be earlier in the membership of a member, so balance is in fact lower there.

Lyndon: Just a random question, what kind of workplaces did you study? Like, was there a range of different types of workplaces or...to sort of get the data?

Dr. Moulang: So the data that we received was funds from the Mercer Trust. So we were very fortunate with Mercer, that they gave us access to 10 years of their longitudinal data of their members, and so that there was a variety of different sorts of funds there. And we tended to group funds in geographical locations together. Paul, did you wanna elaborate a little bit more on the type of funds?

Prof. Gerrans: We had a range of funds. It would have been great to have a really diverse set of funds. So as Carly mentioned, we wanted to correlate those Sub-Plans where we could be sure that people were at one physical place.

So we did end up with a reasonable mix of types of industries. So we had, you know, recruiting schools, financial service, and we did have a range of balances and contributions within those types of workplaces.

Marta: This question might be a little bit skewed based on what we've just discussed. But personally speaking, when it comes to making your superannuation investment decisions, where do you both go to?

Dr. Moulang: Well, I can start. I personally use a range of sources. So I would certainly talk to my peers, particularly those in the Finance Department at Monash. Even though we may have different risk preferences, I'm really interested in their views and what they're doing, if anything, with their superannuation.

I know that there are certain people in the Finance Department who are really engaged with their super and really knowledgeable, so I like to sort of pick their brains and find out how they're investing and also to run ideas by them. So if there's been, you know, something happening in the market, an upsetting event, and I can have that temptation to change investment strategies but my intuition tells me not to do that, I like to just run that intuition by my finance colleagues just to make sure that I'm on track.

Marta: That a nice bonus of having, like, your in-house expert team.

Dr. Moulang: Yes. Yeah, it's good. And about two years ago, I also sought some advice from UniSuper. I had a meeting with a private client advisor. And my husband and I discussed all of our insurances that we have to make sure that we were adequately covered for our needs. So I think for my situation, retirement's probably 20 or so years away. So I think it's important for me to be quite informed about my money and my investment strategies, but also with the long-term lens and not to be too reactive to the market, because I should have that long-term focus.

Marta: Very good. And you, Paul?

Prof. Gerrans: I guess the effect... One of the reasons that I got involved in this type of research was because one of the choices that UniSuper gave...or when they first gave the choice in '98 for members to move from within DB [Defined Benefit] to the accumulation.

And what really struck me and some colleagues was we were getting these incidental questions from people in the staff room, you know, "What should we do?" very close to the deadline. So that really intrigued us that our peers were asking us what was a pretty big decision at that time.

So that actually started...me and a colleague started by surveying members, and then we got involved. We actually contacted former chief executive, Ron Champion, [inaudible 00:15:27] at UniSuper. And then we started to look, actually, at those choices, because, you know, I was surprised at how many people were turning to their peers.

That's a virile, a long-winded way of... I guess I'm more surprised at the fact that people do go and look at their peers. But I guess when I look at individual sources of information... I think it really depends on the type of information that you're after. You know, just picking up on what Carly has said, you know, her experience... In some ways, work colleagues sometimes are those that aren't incentivized when it comes to their information.

They're just giving their opinion, as valid as it is or not, but they're not incentivized. So when I go and look for particular sources of information, I really try to go to those, the un-incentivized sources first. And then as long as I'm aware of what the incentives are, then I'll go and seek information from those other sources. So I'm more likely to start with, say, UniSuper, then progress out in terms of...depending upon the type of information that I was after.

Lyndon: And, finally, a question we like to ask a lot of our guests, and this might sound a bit weird but, you know, go with us. For you guys, like, what does your ideal retirement look like? What do you see yourself doing when you actually get there?

Dr. Moulang: Well, for me, retirement will be about 20 to 25 years away. What I would like to be in is a position where I'm in good physical health and cognitive health and just to be able to afford a very comfortable lifestyle. For me, it's not about retiring with a big bucket of money. It's more about being able to enjoy my life, being able to have a good standard of living.

But also, I think for me as a woman, I'm being quite sensitive to a lot of the retirement research that we see with women and how they are retiring with less savings. I think it's important for me to ensure that I protect myself when it comes to my superannuation and that I take responsibility for how much I save and be able to rely on myself to retire comfortably and not to be relying on my partner, because you just don't know what will happen in the future. Not to say I'm too glum, but just to be realistic.

Marta: That's pragmatic.

Dr. Moulang: And so I think, yeah, I'd like to retire comfortably because of my achievements over my working life and the decisions that I've made with my retirement savings, I think, is quite important to me.

Lyndon: And Paul?

Prof. Gerrans: Well, I'm just a little closer to retirement than Carly is. I don't wanna make it look so it sounds just around the corner, but it's getting closer. For me, I'm just thinking long and healthy, so I guess the archetypal images of being down near the water somewhere, live long and healthy with family.

Marta: That sounds lovely. Paul and Carly, thank you both so much for coming in.

Dr. Moulang: It's a pleasure. Thank you for having us.

Prof. Gerrans: Thanks for the opportunity.

Lyndon: So Dr. Carly Moulang from Monash University and Professor Paul Gerrans there from the University of Western Australia. Great chat.

Marta: Yeah. I was actually surprised by their findings, because, going back to my answer before, I thought we were a bit more like each to their own, but it seems that people are happy to share the love.

Lyndon: It kind of backs up what we were saying earlier. Some of us were saying that we talk to our peers, and the peers seem to be a very powerful resource when it comes to wanting to know a little bit more about your super and finances. So there you go.

Marta: So I guess that brings us to the end of another episode of "Super Informed Radio." Thanks again for tuning in. All the links to the research we discussed will be in the show notes. And we're actually taking a bit of a winter sabbatical, aren't we, guys?

Lyndon: Yeah, yeah. What is it? July we've got off.

Marta: Yes, we do. Unfortunately, I'm not gonna be sunning myself.

Rob: We're taking a break during the winter solstice.

Marta: Yes, we'll be hibernating.

Lyndon: But we will be back. We will be back in August.

Marta: Indeed.

Rob: And as always, if you do get any withdrawal symptoms, you can catch up on past episodes of our podcast at unisuper.com.au/podcasts or subscribe to us through any good podcast app. See you next time.

Lyndon: See you then.

Marta: Bye for now.