Telstra Super has achieved a stunning rate of member retention and is expanding internal investments. SIMON MUMME reports.David Leggo, chairman of the $11 billion Telstra Super and head of its investment committee, has worked in the superannuation industry for more than two decades. But he still likes to attend educational seminars run for members of the fund to gain new insights. It is likely that Leggo will sit discretely in the audience at the next briefing in Melbourne, without suit and tie, to gauge members’ reactions to the information they receive about their super and listen to the questions they ask fund executives. This informs him about the concerns that are at the front of members’ minds and how they can be better addressed. “Our objective is that members remain with us for their working lives and into retirement,” Leggo says. The fund already has an impressive retention rate of 92 per cent – which admittedly includes inactive accounts. But it wants to do better. At the seminars, members consistently ask whether their super savings will fund the retirement lifestyles they envisage, Leggo says.
The 33,000-plus hits on the Telstra Super website’s retirement income calculator since October 2010 reinforces this focus. Part of the fund’s retention strategy is to encourage more members to consult one of its 39 financial planners. Currently more than 27,000 members are in contact with the financial planners, accounting for almost $7 billion of its capital ageing demographic Telstra Super’s membership base is maturing. In part, this is due to the 24 per cent of its capital that is committed to its closed defined benefit division. Like most funds it is tackling the challenges of an ageing membership. “We haven’t got to the stage where we look at modifying investment options. But we recognise the demographic in 10 years’ time will be older,” Leggo says. But as the fund’s membership ages Leggo expects the its ‘defensive growth’ investment option will become more popular. The strategy, designed with a flexible asset allocation that enables it to respond to changing market environments, has already garnered more than $123 million since it was launched in July 2010. Members can split their savings across investment options to achieve a blended exposure that suits their aims.
For now, Telstra Super’s response to the challenges of increasing longevity among members is to engage them through educational and advice services. “We don’t just want people in their 50s to see our financial planners,” Leggo says. “We’re trying to get people under advice right across the age spectrum.” investment initiatives Telstra Super continues to make “small steps” towards empowering its investment staff to directly manage more money, Leggo says. Over time it has increased the volume of Australian equities managed in-house to 25 per cent. More recently, the fund trialled its ability to manage cash internally. Following an assessment and audit of its cash management processes the team was given a mandate to run $250 million of its $1 billion in cash holdings. “We plan to increase that,” Leggo says. By expanding its internal investment abilities the fund aims to reduce the amount of fees it pays to external funds managers and use savings to improve services to members.