Corporate superannuation has long been the realm of the large whole-sale financial services groups to the exclusion of financial advis-ers, but that is about to change, reports John Wilkinson.
Corporate superannuation has long been the realm of the large whole-sale financial services groups to the exclusion of financial advis-ers, but that is about to change, reports John Wilkinson.
Those financial planners who work the corporate superannuation market will never have to look for another client again.
This is the prediction of some of the product suppliers who see a growing market waiting for planners.
Meanwhile, those who already are working this market and know its possibilities are holding their cards close to their chests.
Fund managers also have realised the potential. Norwich and National Mutual have launched corporate superannuation products to be sold di-rectly through planners. It is understood that others will follow suit later this year.
The targets for advisers selling into corporate superannuation are the small to medium-sized enterprises (SMEs), although some larger organisations have handed the administration of their fund to an ad-viser.
There are predictions in the marketplace that within five years only be a handful of firms will still run their own corporate superannua-tion funds. But how big is the potential market for advisers?
National Mutual Funds Management product development manager Mick O’-Brien says there are 50,000 funds with an average of two to three em-ployees and another 2000 with about 50 employees.
“We find the average fund size for advisers to sell our Super Direc-tions product to companies is five employees,” he says.
The target markets for National Mutual are companies with funds of between $10 million to $30 million, although recently advisers have written business for much larger funds.
Norwich, through its Super Solutions product, is also aimed at SMEs, although manager of superannuation and investments, Sue Homewood, says advisers also have brought in larger funds of up to 700 members.
“We are aiming at medium-sized companies with about 20 members,” she says.
A further indication of the market’s potential can be gained from re-searcher Plan for Life. According to research undertaken for Colo-nial, the employer superannuation market was worth $238 million at the end of 1998. This is predicted to rise to $324 million in 2000 and $654 million by 2005. Based on these figures, the market is show-ing 16 per cent annual growth.
Colonial general manager wholesale financial services Rob Whelan says advisers selling superannuation products to companies is all part of the blurring of retail and wholesale financial services.
“We are all moving towards that trend,” he says. “That is going to be the future for advisers.”
Selling superannuation products to companies raises some questions for the adviser. For example, who is the real client – the employer or the employee?
National Mutual’s Mick O’Brien says the employee is the real target, but the sale process is a two-part affair.
“The adviser first has to sell the superannuation product, like a master trust, to the employer. Then they can help the employees with their superannuation,” he says.
This is subsequently divided into those employees who need advice and want to take an active role in their superannuation. Inevitably this tends to be the top management of a company’s fund.
“These people want advice on a one-to-one basis and it presents the adviser with the opportunity to sell other products,” O’Brien says.
Norwich’s Sue Homewood believes the growth of member choice means em-ployees need to be made interested in their superannuation.
This means advisers play an active role in the education of the mem-ber, building a relationship with them at the same time.
“If the adviser is dealing with a national company, then they will have to look at using cost-effective ways, such as the Internet, to reach all members,” she says.
“As people understand their superannuation more, then the opportuni-ties to on-sell grow.”
Colonial’s advisers are positioned to sell wholesale superannuation to certain market sizes, Whelan says.
Advisers tackling small companies are usually dealing with schemes of less than 50 employees and on average between 10 and 15 employees. Other advisers are trained to handle bigger schemes.
The adviser acts as a facilitator for a very large fund, while Colo-nial handles the day-to-day operations. “The adviser has the opportu-nity to build a relationship with the employees,” Whelan says.
The relationship-building exercise allows the adviser to cross-sell; a strategy Colonial is keen to build among its various divisions. Whelan says the cross-selling covers Colonial’s range of financial services products such as mortgages and credit cards.
A problem facing advisers is trying to keep track of employee clients when they change jobs amid a flexible workforce. Companies like Nor-wich and Colonial are allowing members to switch from the corporate part of the superannuation master trust into the personal super sec-tion.
At Norwich, the employee’s superannuation is transferred automati-cally into the personal fund and the advisers are sent an email to inform them of the change.
“This takes the burden off the employer and enables the adviser to maintain their relationship with the employee,” Homewood says.
Whelan says Colonial’s product is designed for portability to over-come the situation of an employee leaving a company.
“With Super Choices, the member is transferred down the line to a personal fund, but they lose some of the wholesale discounts in the process,” he says.
National Mutual also has the ability to transfer the member. Keeping the adviser informed of moves is a result of the quality of National Mutual’s back office operation, O’Brien says.
“Moving the employee into personal superannuation section helps the adviser keep their trail fees,” he says. But moving employees into personal superannuation has created the problem of members having a small amount of money in a lot of funds.
“There are about 20 million superannuation accounts in Australia, yet there are only 7 million working Australians,” O’Brien says. “This means each working Australian has three superannuation accounts on average, and there is a lot of opportunity for advisers to roll these over in one fund.”
Colonial’s Rob Whelan agrees there is a lot of opportunity for advis-ers with corporate superannuation.
“Apart from the opportunities with people having multiple funds, there are also new people regularly joining a company’s fund which creates more opportunities for the adviser.”
