Research commissioned by ASFA shows only a small proportion of super fund members has switched funds since the introduction of Choice of Fund in July and a majority of members are “not at all likely” to change.

However, the research notes that returns represent the key driver of retention and choice, as well as the key driver of satisfaction. While the satisfaction level rose from 77 per cent to 83 per cent when compared with similar research a year ago, the researchers note: “This may well be the high water mark for the industry as the coincidence of a strong economy, high returns, smooth transition to choice and benign PR environment where safety of super is not an issue, may not happen again.” Ironically, the happiest members are in the rapidly diminishing corporate funds sector or the “still relatively well looked after” public sector. The research was conducted by ANOP and presented at last week’s ASFA conference. It involved interviews with 500 people between 25 and 64 in regular full or part-time work. Its main finding was that only 7 per cent of people had switched funds because of Choice and another 5 per cent were likely to do so within the next 12 months. This is roughly in line with ASFA’s predictions prior to the legislation taking effect. But ANOP’s comments raise the question as to what is likely to happen if and when returns are low or negative, either across all funds or particular funds. Some have suggested that the impact of Choice of Fund may be like the impact of certain new technologies: less than expected in the short term but much more than expected in the long term. The research indicated a “clear display of increasing fund loyalty” with the “rusted-on” component of fund members increasing from 37 per cent to 55 per cent in the past year. “It appears that the most significant outcome of the choice campaign is a sharp increase in commitment to existing funds, rather than a desire to find greener grass elsewhere.” Of those people who have changed funds, the main reasons given were “fees, returns and the desire to consolidate a number of funds”. About half of the changers went to industry funds and a third to a retail fund. ANOP stressed the survey numbers were small and related to members, not assets. However, there appears to be little movement to self-managed funds. The researchers predict that consolidation of fund accounts may be the “sleeper trend” in superannuation in the near future. There are 27 million super accounts in Australia compared with a workforce of just 10 million. “More than four in 10 report having more than one fund – a segment too big to be ignored by super marketers,” the report says. “And it is the retail funds that should be really interested in consolidation – not only because the biggest percentage of multi-fund members have a retail fund as their main one (49 per cent), but also because those most likely to change are in fact the multiple fund members.” You would have to expect that if a member consolidates a number of fund accounts, he or she is likely to put the money into the fund with the most of his assets already, all other things being equal.

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