IFS retail push tests new ground for industry funds

WITH a view of the sun setting over the Whitsundays from his position at the bar, Garry Weaven is looking way too relaxed for someone who has been busy putting the finishing touches on a long term vision.

But then looks can be deceiving, and to many of those gathered on Hamilton Island for this year’s Industry Fund Services (IFS) conference, the future of financial services is exactly what Garry Weaven, the executive chair of IFS, represents.

IFS, the financial services group largely owned by a consortium of union-sponsored industry superannuation funds, has just put the finishing touches on its much anticipated suite of non-super retail investment funds.

And, earlier this year, Members Equity, a joint venture between IFS and AXA Australia that offers home loans to industry super fund members, had its application for a banking licence approved, allowing it to dramatically expand its range of financial products to include savings accounts and credit cards.

Together, the retail funds and the banking licence for Members Equity round out Weaven’s vision for IFS as a diversified financial services network for industry superannuation fund members, and for making industry super funds the new mutual societies of Australia’s financial services sector.

Through IFS, industry fund members and their families can now access the full spectrum of financial services products outside of superannuation. Members can borrow money, open savings accounts, or charge purchases to a credit card, and if there is anything left over, they can invest in one of IFS’ six new retail investment funds - all without having to take one step out of the industry fund network and with access to IFS’ 23 in-house financial planners at any point along the way.

The industry fund network itself has come along way since Weaven, who rose to become assistant secretary of the ACTU for a period in the mid-1980s, formed IFS in 1994 in order to tap into the then burgeoning industry fund sector.

In fact, the largest industry funds are now managing well over $3 billion and the sector as a whole is worth about $40 billion and has been the fastest growing segment of the super industry for some time.

“Industry superannuation funds are very rapidly growing and in a number of cases they are becoming very major institutions in their own right,” Weaven says.

And it is exactly that growth that Weaven is looking to draw on as a provider of banking products and retail-focused investment funds, both of which will be marketed exclusively to members of industry super funds and their families. A part of this push is to use the industry super fund low-cost catchcry as a major selling point.

Take IFS’ new retail funds for instance. The funds, which will include four diversified portfolio funds, an Australian share fund and an international share fund, will be sold with no entry or exit fees, free of any commissions and with a maximum management fee of 1.84 per cent, making them the lowest cost products of their type in the country, according to Weaven.

IFS’ financial planning arm, Industry Funds Financial Planning, will run up to 400 seminars every year extolling those very virtues, and push the retail funds in direct competition with similar products offered by Australia’s major fund managers.

Should more traditional providers of retail managed funds be worried? Perhaps not quite yet.

The average industry super fund has over 53,000 members, but each of those members has an average superannuation account balance of less than $10,000. Not exactly what you would call a high net worth clientele.

The move will also test the affinity of industry super fund members to the industry fund sector. The success of industry super to date has largely been the result of two factors: compulsory government mandated superannuation contributions; and the fact that most employees cannot actually choose their own super fund.

It is a whole separate story to ask industry fund members, as consumers with a choice, to choose IFS over more recognised financial services organisations. That is the big question mark hanging over Weaven’s grand vision.

“This is the ultimate test for the industry fund network,” Weaven admits.