The super industry must communicate a richer picture, in intuitive terms, of superannuation and retirement, as the framing of these concepts plays a fundamental role in the way Australians understand and behave during their life cycle.
“I think we need to get a lot clearer and [be aware of] just how important the framing piece is,” Drew, Walk & Co director Michael Drew told the 2015 SMSF Association National Conference in Melbourne today.
“Why this is so vital to the agenda of the SMSF Association, your practice and particularly for your clients is because the idea that what’s safe and what’s risky changes through the life cycle and behavioural finance is a way of thinking about the psychological underpinnings of the economic analysis undertaken.”
Drew said it was time for the super industry and regulators to come together for a serious debate about assisting individuals in framing potential retirement income in the future, as superannuation had encapsulated a “pot of gold” framing.
“How it is framed absolutely matters and as an industry we tend to serve this up pretty well, and we’ve created this ‘what’s your number?’ mentality where we know that the framing of retirement is very much different,” he said.
“The complexity of retirement risk, longevity, sequencing, healthcare and aged-care issues are far more complex to be solved by a pot of gold framing.
“Without question, people can relate to replacement of retirement income, but cognitively they find it very difficult to take a pot of gold and convert that into a retirement income stream.”
He said global research demonstrated goal clarity could affect an individual’s task performance.
Drew is a professor of finance at the Griffith University Business School.
