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.
Woolaston said: “Platinum received the highest net promoter score. Investors in Platinum gave them particularly good ratings in the areas of ‘performance’ and ‘response to the global financial crisis.’ Platinum also received high ratings in all areas of communication.” Johnston said that client satisfaction was clearly linked to effective communication. The largest gaps in managed funds client service were that fund managers did not provide direction on what to do next, did not keep investors informed, and did not provide sufficient information on how they were responding to the global financial crisis.
“Managed fund investors are clearly still hungry for information about the market turmoil and its implications for their investment,” said Johnston. “Even though the industry has been working overtime on communications since all of this began, six out of 10 managed fund investors said they still wanted even more information from their main funds manager.” The proportion of investors who had spoken to a financial planner about the market fell 18 per cent since November 2008, and the proportion of those who said a financial planner was the main influence on their decisions fell 34 per cent.
Last month, a research piece from Investment Trends/AMP Capital Investors reported an increase in the establishment of Self Managed Super Funds because investors were not happy with the performance of their existing super fund and the fees charged. One-third of SMSF trustees were interested in buying undervalued assets in May on an opportunistic basis over the next 12 months, up from 25 per cent in July last year. Two-thirds of SMSF trustees were glad they had set up their own funds. “Some of the higher-balance super fund members who are considering switching may look to set up an SMSF,” said Woolaston.