Morningstar to expand to superannuation ratings

Superannuation morningstar financial advisers licensees superannuation funds

14 March 2024
| By Laura Dew |
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Global ratings house Morningstar is going to offer research ratings for funds in the $3.5 trillion superannuation sector for the first time. 

The research house is currently developing data, research and rating solutions that will boost its coverage of superannuation funds in light of the multitude of accumulation and retirement product choices in the market.

In an interview with Money Management, chief executive Kunal Kapoor said the information has been requested by financial advisers for a long time, although it has not yet set an official launch date.

However, since there has been greater discussion about the role for superannuation funds in the Quality of Advice Review plus the introduction of APRA’s annual performance test, Kapoor said the time is now. 

“We’re building a super funds database; we do research on them. Advisers have been asking us in Australia for them for a long time. When advisers think about helping individuals with their financial life, you can’t do that in Australia without considering and fully advising on their super fund.

“We had different priorities until now and the ecosystem didn’t really lead to engagement between advisers and super funds and post-royal commission whereas there is that engagement now.”

This also will be an area of focus for Mark Hoven who joined the firm last October to drive its expansion in the superannuation and retirement space, which Morningstar said are becoming key areas in light of the retirement income covenant and the intergenerational wealth transfer. 

Prior to joining Morningstar, Hoven worked as chief executive of Adviser Ratings for almost four years before becoming the country head of Australia and New Zealand at S&P Global Market Intelligence.

In February, ASIC put advisers and advice licensees on notice following a review of the role they play in influencing the investment options in members’ super portfolios. This included failure to undertake reasonable assessment of underperforming super options and failing to explain why members are being retained in an underperforming option. 

Recommendations were made that advice licensees should adopt “rigorous processes” to detect and deal with underperforming options and avoid relying too heavily on external ratings. 

Kapoor also discussed how super funds are making greater effort to engage with their members as they embrace a shifting wealth landscape. In a formal response to the Quality of Advice Review, the government suggested super funds should be able to provide advice to their members alongside insurers and banks.

Minister for Financial Services, Stephen Jones, also previously called on funds to “step up to the mark” on member engagement to improve member satisfaction levels in the face of complaints. 

“Survey after survey shows Australians’ engagement with their super fund is low, especially among younger Australians. More strenuous efforts must be made to address this situation, because when members engage with their super fund, everyone wins,” he wrote in an op-ed for The Australian last year.

Kapoor commented: “Insto investors used to be less focused on engagement, but they are coming round to it because of the shifting wealth landscape in Australia since the Hayne royal commission. An outcome of that was the realisation by the superannuation funds that even though they weren’t in the wealth business, they need to be close proximity to it and in the ecosystem of financial advisers. 

“So you are seeing a manifestation of that where banks are coming out [of advice] and super funds are on their way in, that’s the direction of travel.” 

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