In its submission to the Financial System Inquiry, DFA argued these measures are only relevant to investment professionals and should only be delivered to those members who have an understanding of their meaning and relevance in selecting a fund or investment option.
The submission argued defined contribution plans “place a tremendous burden of complex decision-making on the user”.
The document said selecting and executing a dynamic portfolio strategy to achieve an adequate level of retirement income is an “extremely complex problem, even for the best financial minds”.
“Yet, through the use of [defined contribution] plans, the financial industry is, in effect, asking employees of all sorts—from brain surgeons, to teachers, to assembly line workers—to solve just such a problem,” the submission said.
DFA compared this to a doctor asking a patient whether they should use seven or 17 sutures and letting the patient decide.
“Not only is that a frightening decision for a patient to be faced with, but it is one that most patients are, at best, poorly qualified to make,” said the submission.
While DFA believes users should be given choices it said the industry should be designing defined contribution plans that allow people to make decisions on factors that make sense to them.
“We need to design products based on questions that most people find reasonable such as “What standard of living do you want in retirement? What standard of living are you willing to accept? What contributions or savings rate are you willing or able to make?”
The submission argued that this type of question makes more sense to people than questions about asset allocation.
DFA also believes the design of how users interact with super products needs to remain consistent.
“An unchanging design leads to tools that people will be more likely to learn and use,” said the submission.
“The goal is to be innovative without disturbing the user’s experience because planning for retirement is a complicated matter that should not be made more difficult by providing tools that are difficult to use.”
