The superannuation industry has largely underestimated a shift in employer mood, with many employers now fed up with complex and demanding employee benefit structures.
The superannuation industry has largely underestimated a shift in employer mood, with many employers now fed up with complex and demanding employee benefit structures. They are making a push for simplicity, including superannuation. Many funds face the risk of being left behind, unable to keep up with this changing marketplace.
The key to success in this market is to recognise the change in the employer role, to the facilitator of benefits, rather than the total provider of bene-fits.
While the industry and Government are preoccupied with ‘Choice of Fund’, employ-ers are tired of the constant changes and increased complexity.
For some of these reasons, we anticipate a decline in DIY superannuation, while the master funds sector continues an era of strong growth.
One reason DIYs were so successful is that too many in superannuation had been slow to realise that investors wanted to use their superannuation for direct purchase of shares. Accountants, on the other hand, were fast in picking up this drive and they geared themselves up to provide DIY for their clients. The big changes are that shares can now be purchased direct through master funds, in-cluding the added benefit of loyalty cards in their own name, and accountants are preoccupied with the demands of the GST.
The DIY market is like family trusts a decade ago. All of a sudden, people have realised that compliance costs are too high and unless a person holds exotic in-vestments or wants their office or warehouse within their superannuation, the DIY option makes little sense.
Small to medium enterprises are behind the push for simplicity and the rise in master fund usage, because:
* growth in outsourcing with concerns over compliance and fiduciary risk;
* direct access to shares and loyalty cards through master funds;
* simplicity and the benefits of scale; and
* a desire to focus on core business activities.
Outsourcing is continuing to grow and many employers are reviewing their compli-ance costs, while the individual supplier of outsourced services is looking for value added, such as low cost insurance and investment options.
Many small to medium enterprises want to off-load the role of trustee, and are turning to a combination of master fund and financial planning to act as the go-between for employees. By combining master fund flexibility with the provision of financial planning for employees, the employer has produced a simple way of meeting all their obligations and placing responsibility on the well-resourced employee.
Choice of fund is adding to the push for a change, because employers see it as yet another example of why superannuation is far too complex. In a complex envi-ronment, employers are seeking simplicity, particularly for non-core business activities. Master Funds have been quick to respond to these new requirements.
The key to future success is in the buzzwords of simplicity, choice, diversity, flexibility and performance. Superannuation providers need to heed the employer cry: “Give me simplicity in employee benefits”.
Christopher Kelaher is managing director, SMF Funds Management.
