Australia is a smaller country financially than the United States, with fewer companies, fewer stocks traded on the exchange, and, of course, only 25 million people vs. some 325 million in the US.
Yet, it is a useful microcosm of our country, it is a developed country, and they are doing things that we well might learn from.
For example, one of Australia’s most impressive features in the financial planning world is its superannuation plan – essentially, a retirement account. Every employed Australian has a retirement account under this platform, and employers must to contribute to it. Today, the yearly mandated amount for employers is 9.5% of an employee’s salary. Each account is not only owned by the individual employee, but also managed by that employee.
The superannuation system was put in place in 1991, and at the end of the first quarter of 2018 it held $2.6 trillion, making it the fourth or fifth largest pension account in the world. It’s a unique system, and one that has met with a great deal of success. In a recent US News and World Report (2018) for “retirement preparedness,” Australia rates seventh in the world.
Australia also has something similar to our US social security system, which is separate from the superannuation plan. This is funded out of the country’s general revenues, and there is no employer contribution.
My Financial Planning Association colleagues and I were also extremely impressed by our host country’s regulatory environment.
We envied the fact that Australia has adopted a set of fiduciary standards unlike anything we currently have in the US. They are taking aggressive steps to advance the financial planning profession, to improve the quality of financial advice that is being provided, and to protect consumers.
For example, within the next few years all financial advisors will be required to have a college degree in financial planning. In the US, a handful of colleges offer this degree (I have one), but it is not required to practice the profession.
In my next blog, I'll talk more about what I learned through this experience.