That’s what happens when you get bigger and don’t necessarily pass cost savings on.” As memberships shift into the decumulation phase, funds will also need to provide a range of investment, engagement and advice services for retirees. E-mail communications and, in time, online contribution payments will improve productivity, but there are some services that funds will need to beef up, such as the call centres run by administrators. “Retirees have a lot of time on their hands. Some call their super fund each day, and they will spend 30 minutes on the phone instead of 30 seconds,” Rice says. Canaries in the coalmine When pundits express their fears for a bland, passively-managed MySuper universe, they are often thinking of a handful of products that already exist. The one that has received by far the most airplay has been AMP’s Flexible Super, launched with considerable fanfare in the middle of last year. The ‘Core’ Flexible Super balanced default option, with 70 per cent growth assets, promises a fee lower than the default option of most not-for-profit funds – just $403 per year for a member with a $50,000 balance, compared to $508 for the average ‘balanced active’ industry fund option (the comparison uses Chant West numbers and does not include insurance premiums or transaction costs). There is one important difference between ‘Core’ Flexible Super and that average industry fund default option, however. While most of the industry funds use a ‘core-satellite’ approach, combining passive beta with active management and alternative asset classes such as private equity, AMP’s product is indexed all the way. It doesn’t even look externally for the manager, with AMP Capital Investors doing the honours. The director of wealth management products at AMP, Chris Jansen, says it is yet to be decided whether the ‘Core’ Flexible Super option will form the basis of a MySuper fund. The Flexible Super product suite includes the indexed ‘Core’ and ‘Select’ options as well as an actively managed ‘Choice’ option, cleverly adopting the Cooper Review jargon for the funds that will lie outside MySuper. The suite had racked up over $1 billion in funds under management (FUM) by the last quarter of 2010, taking just six months to do what another product pitched at the ‘simple, low-cost’ market – BT Super For Life – had taken three years to achieve. To be fair, some of that FUM had been shifted across when AMP closed its Flexible Lifetime Super suite. Still, there can be no denying that the bargain basement price tag has attracted the punters. It even spawned an imitator.
Greater transparency brought on by new regulatory requirements will lead to funds quickly realising the writing is on the wall to merge, but time might be running out for some, Togethr and Equipsuper's Andrew Fairley says.
Matthew SmithFebruary 8, 2021
Darren and Chris answer this question and more in episode eight of The Rate Debate.