David McKnight

Overview

Saving Face by David McKnight is a thought-provoking book that explores the history and dynamics of Australia's major independent superannuation funds.

McKnight, a respected finance journalist and scholar, delves into the operations of these funds and analyzes their role in shaping Australia's investment landscape. By examining their decision-making processes, investment strategies, and relationships with various stakeholders, McKnight provides valuable insights into the world of superannuation funds and the broader financial system in Australia.

Key Points / Ideas

McKnight's key argument centers around the idea that Australia's major independent superannuation funds, or what he refers to as the "super industry," have prioritized maintaining a positive public image, or "saving face," over maximizing financial returns for their members. He argues that this focus on perception management has led to suboptimal investment decisions and an overall lack of transparency in the industry.

To support this argument, McKnight presents several compelling examples and evidence:

1. Influence of industry stakeholders: McKnight highlights how the super industry is influenced by powerful stakeholders, such as unions and employer groups, who often have conflicting interests. He argues that these stakeholders shape the decision-making processes and investment strategies of superannuation funds, sometimes at the expense of financial performance.

2. Pressure to maintain positive public image: McKnight contends that the super industry is highly sensitive to public perception and media scrutiny. He asserts that funds prioritize positive PR and reputation management, which can lead to decisions driven by optics rather than financial prudence.

3. Limited investment options: The author points out the industry's heavy reliance on traditional asset classes, such as Australian equities and property. McKnight argues that this narrow investment focus restricts diversification and potentially hampers long-term returns for members.

4. Lack of transparency: McKnight highlights the lack of transparency in the super industry, with limited disclosure of performance data and potential conflicts of interest. He argues that this lack of transparency makes it difficult for members to assess the performance and decision-making of their funds.

Conclusion

Saving Face offers a critical analysis of Australia's superannuation industry and its impact on the country's financial system. McKnight's exploration of the decision-making processes, influence of stakeholders, and focus on reputation management provides readers with valuable insights into the complexities of the super industry.

By outlining the limitations and consequences of these dynamics, McKnight encourages readers to question the prevailing practices in the industry and advocate for greater transparency and alignment of interests. For those interested in gaining a deeper understanding of Australia's superannuation funds and their role in the economy, Saving Face is an essential read.

Readers who want to explore similar topics may find books like Super Power: Australia's Low-Cost, High-Impact and Sustainable Superannuation System by Professor Pauline Vamos and The Future of Super by Andrew Podger and Dennis Trewin of interest.