The chief executive of industry fund HostPlus, David Elia, admits the likes of AMP Flexible Super was in his fund’s sights when it announced an ‘Indexed Balanced’ option last year. Priced at an eye-watering 0.036 basis points plus $1.50 per week management fee, the Industry Funds Management-implemented option will cost a member with a $50,000 balance just $96 a year. Elia insists that the HostPlus MySuper offering will probably look a lot more like the fund’s current default balanced option than it will Indexed Balanced. However, the ultra-cheap option was already on its way past $1 million under management at the end of December – and that was with zero direct promotion to members – so perhaps tactics will change if the passive strategy becomes enormously popular. Warren Chant, however, believes HostPlus might not actually want droves of members flocking to Indexed Balanced. “I don’t think they actually want a lot of money in it, it’s more about proving a point. HostPlus is saying, if you really want one of these simple all-indexed super funds, here’s one for a price that’s really cheap.” AMP’s Jansen, however, deflects criticism that all-indexed options like his are creating a ‘race to the bottom’ across the industry. He points out that while 85 per cent of AMP Flexible Super members are in the ‘Core’ or ‘Select’ streams with the passive investment strategies, they only account for 47 per cent of its total assets under management. “The Choice stream, which is actively managed, has the majority of FUM. We find that’s where members go after they have received financial advice,” he says. MySuper, with its banning of all adviser commissions and insistence on bare-bones communication, represents a big departure from the full-service retail model of old. However Jansen does not believe it is AMP’s duty to educate and engage every single Australian with their superannuation. “AMP will go along with anything that creates a better retirement for Australians, and not having them pay for things they don’t use or need is part of that.” This is somewhat counter to the view held at BT Financial Group. Its BT Super For Life was the first retail foray into the world of simple, cheap retirement products upon its launch in October 2007. Long before MySuper created a mood to accept mass disengagement with retirement saving, BT Super For Life had the lofty goal of educating and involving ordinary workers with their superannuation. This aim was reflected in BT Super For Life’s distribution model. From day one it was heavily promoted by tellers at its parent bank, Westpac, over the counter at branches.
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.