No change on the super horizon

Anyone expecting to witness a significant change in the superannuation and master trust landscape as a result of the implementation of the new choice of fund regime will have been disappointed.

Notwithstanding the fact that heavily marketed Virgin Super has managed to gain an initial foothold in the Australian superannuation market, the level of membership churn resulting from choice of fund has been very limited.

And this is pretty much what was expected by the industry, with spokespersons such as AMP’s director of product manufacturing Craig Meller suggesting that it will take at least two years, and perhaps as many as 10 years, before the full implications of choice of superannuation fund manifest themselves.

And, while the industry superannuation funds might be labouring the issue of their competitive advantage with respect to fees and charges, people such as Meller believe that the longer-term catalyst for change is likely to be value and quality of advice.

He said that over the next decade, the biggest issue for Australians would not be whether they saved with an industry fund or a retail fund but, rather, that Australians generally did not plan their financial futures well enough.

“Australians are generally under-saved, under-insured, and over exposed to expensive debt,” Meller said.

His views, initially canvassed during August’s Investment and Financial Services Association (IFSA) annual conference in Brisbane, have been echoed in recent weeks by IFSA chief executive Richard Gilbert and the Financial Planning Association (FPA).

Both Gilbert and the FPA have sought to shine the spotlight on the “value of advice”.

The key points being pushed by Meller on impact of choice of fund are, as follows:

* Choice has had no major consumer impact yet and in two years time we think we’ll probably be saying the same.

* We do not believe choice will result in a war between industry and retail funds, or between industry funds and Virgin.

* We do believe that it (choice) is a key enabler which, over the next 10 years, will change the savings landscape hugely.

* We believe that providers of affordable quality advice will win the battle for Australians’ savings — and frankly those winners could come from any of the existing sectors.

Meller’s view, not surprisingly, echoes with those expressed by the FPA when it launched its Value of Advice campaign late last month.

FPA chief executive Kerrie Kelly said the campaign is being aimed at people who have not used financial planners before, and is intended to encourage them to consider the value of professional advice.

“It will communicate the fact that financial planners provide quality and useful advice and assistance that will help Australians plan for, and take steps to achieve, future financial well-being,” she said.

If one master trust has appeared to do well out of the implementation of choice of fund it has been Virgin Super.

Virgin, which could best be described as a “heavily-promoted start-up”, was in early September claiming it had opened almost 10,000 super accounts, and was receiving up to 3,000 enquiries a day, primarily through its web site.

However, data being compiled by major groups such as Mercer and AMP suggests that those migrating to Virgin are mostly younger people with lower account balances.

While a number of commentators suggested that major groups such as AMP might experience the greatest number of losses due to the size and diversity of its customer base, migrations have been relatively low.

AMP corporate superannuation director Greg Healy acknowledged the expectation among some commentators that the company might be hard-hit by choice of superannuation fund, but said this had proven not to be the case.

He said that while there had been a higher level of churn experienced in the months since choice was introduced, around 80 per cent of those who had sought to exit an AMP product had simply chosen to migrate to another AMP product.

“We have been monitoring the exits and where people are choosing to go, and the fact that so many people are simply moving to another AMP product is very satisfying,” he said.

Healy said that when the exits were analysed, it was fair to say that no particular type of fund had emerged as a dominant destination, with people deciding fairly evenly between other master trusts, industry and corporate superannuation funds.