More super fund members are considering switching funds – without consulting a financial planner – as the market downturn eroded trust in fund managers, according to a new survey. Investors are mostly dissatisfied with not getting enough information about costs associated with their super and about the future direction from managers through their regular statements and reports. A survey of 5,600 investors in July by market research firm Investment Trends found that twice as many people do not trust their super fund as those who do trust it.

The survey showed that the number of industry super fund members who are considering switching within the next 12 months almost doubled from 8 percent in November 2008 to 15 per cent. For retail fund members, 6 per cent said they would definitely change their main provider, up from 4 per cent previously; while 24 per cent said they were considering switching, up from 17 per cent. “We found that an intention to switch funds was strongly linked to how much the investor trusts the fund,” said Alex Woolaston, Investment Trends analyst. “Building trust between the funds and investors will be important for funds to retain members.”

Mark Johnston, Investment Trends principal, said although investor sentiment towards markets had improved, 19 per cent of super fund members no longer trusted their provider. “Overall, 29 per cent of all investors who were intending to switch said that they would consult no one before making changes,” he said. According to the 2009 Investor Sentiment and Communications Report, more than half (54 per cent) of the investors said they no longer trusted funds managers and would invest directly in the future. Among them, 62 per cent of those aged more than 66 agreed, compared to 35 per cent aged between 18 and 30. “Most wealthy investors are older,” Johnston said. “That means funds are faced with a higher level of distrust among their more valuable members.

The problem is that many investors blame ‘financial services’ companies for creating the global financial crisis, and don’t necessarily distinguish between greedy Wall Street investment bankers and local funds managers.” Investment Trends suggested fund managers should be proactive in sending additional communications over and above the regular statements and reports, especially on cost information. “As with prior downturns, investors have become more concerned with fees, charges and value for money. Negative returns have once again increased the focus on cost,” Johnston said. Among 21 super funds and 11 fund managers covered in the survey, only Kerr Neilson’s Platinum Asset Management was more likely to be recommended than not by current investors, followed by Vanguard and UniSuper. Other funds/managers with high net promoter scores included Australian Super, Host Plus and ING/ANZ.

Leave a comment