Party politics may be holding up member choice superannuation legislation, but it has not stopped a number of companies outsourcing their corporate superannuation accounts to financial planners. Julia Newbould spoke with a number of advisers who have managed to crack this potentially lucrative market.
Happy is the planner who can sign up 4000 potential new clients in a single deal.
But one Sydney planner has done just that. The planner in question had the foresight to target the potentially lucrative area of corporate superannuation and the good fortune to land the Manpower account – a business with more than 4000 employees. Subsequent to landing the contract, the planner has been told that about half a dozen advisers are making inquiries about this particular account each week.
Interest in corporate superannuation has begun to take off even before the much-awaited member choice legislation has been put in place.
For financial planners deciding to specialise in corporate superannuation, it is often a case of first in best dressed, according to industry consultant Grant Abbott. Abbott has already helped a lot of advisers structure tenders to win that type of work and estimates there are hundreds of planners now specialising in the area.
Abbott recommends advisers lock companies in now, before the wave of member choice hits. Member choice will create a rush of corporate superannuation opportunities for planners, so now is the time to start focusing on that business.
Abbott says financial adviser have the advantage of being able to set up a fund or close down an employer fund as a cost saver to the employer.
“Asset managers charge thousands of dollars whereas financial advisers charge a fee, may get trails,” he says. “If an adviser does well they’ll get leads. Many will hold quarterly or six-monthly seminars for employees and with that will get the opportunity to talk about mortgages, risk and other financial planning issues. It’s a case of working smarter at a lower cost.”
Another Sydney-based outfit Guest McLeod has been involved in corporate superannuation since the 1970s. The group is focused on white-collar industries and computer-based companies in particular because of its growth potential.
“In every industry, very few people know about financial planning. You are often well received,” says Guest McLeod manager of corporate super Murray Fogarty.
Although there are many more players in the market than when Guest McLeod first focused its business on corporate super, Fogarty says corporate superannuation is still a strong market, especially for up and coming financial planners to develop their practices.
“If you service your corporates well you get a lot of leads,” he says.
Hillross planner Russell Medcraft says that although there are opportunities in the area it’s a specialist field, so it is hard to break into.
“Younger planners need to put in the yards – utilise technology, perform transactions online and develop payroll mechanisms. If you work in conjunction with the payroll provider then you’re two thirds of the way there. Employers neither have the time or expertise.”
Medcraft estimates his own business is growing at 30 per cent a year. Most of his revenue comes from consulting to corporates.
“I’m definitely going to stick to this area but will also provide other services such as accounting and tax services,” he says.
“At the end of the day, we’re endeavouring to open the door to value-added services for employees. Only half or a 100 or so can afford it. Others are too young, have no money or feel they have no need.”
Financial Wisdom planner Chris Peters says one of his big corporates puts about $700,000 a year into super.
“In 1999 I’m hoping to put a new emphasis on the corporate superannuation area and attack the Brisbane market as well,” he says. “There is a huge demand out there for advice for large corporates who realise that having trusteeships of funds is no longer attractive,” he says.
“Employers don’t want to be faced with their staff asking them whether they should be investing in equity, cash, aggressive funds, etc. They can refer these questions to planners and some questions may even be bounced back to the providers.
“Although this is a neglected area, financial planners are rapidly hitting onto it. A survey of big companies would probably show that most have engaged the services of a financial planner.”
Peters anticipates the corporates being more organised in the future and encouraging competitive bids from planners.
“Corporate super is an enormous area for financial planners. There’s potentially more business in that area than every other area because of the staggering amounts of money.” Peters says.
In seven years, his funds under administration have increased by 800 per cent.
“The affect of that on a financial planning business is staggering,” he says.
