Does choice equal empowerment in financial decisionmaking

1
Does choice equal empowerment in financial
decision-making?

• Josh Fear

2
Choice and complexity

• Good choice and bad choice
• Subjective vs objective choice
• Choice overload
• What if people dont really care?

3
How women lose from choice
4
How women lose from choice

• Pay equity gap
• 1983 19.4
• 2007 16.3
• Average super balance (2007)
• Men 69,020
• Women 35,520
• Is choice better for men than women?

5
What can we do about it?
Leaving it to the market
Strengthening default options
Regulating
Laissez-faire
Interventionist
Improving disclosure
Protecting consumers
Improving financial literacy
6
Default options for super - principles

• Embody a rational approach
• Focus on people with modest benefits
• Maximise accumulation
• Promote fairness
• Reduce framing bias
• Optimise the risk/return trade-off

7
Some ideas for default options in super

• Cap ongoing fees and charges
• Prohibit entry fees and limit exit fees
• Prohibit the payment of ongoing financial advice
  fees, including commissions
• If contributions cease, keep members in the
  default fund
• Automatically follow up arrears in payments