Trustees need to understand the values and demographics of their memberships, and to critically examine their own strengths and weaknesses – first and foremost – before determining how merging with another fund can maximise efficiencies for their combined membership. Where to now? As funds deal with these macro industry trends, some have been working hard at the micro level to improve their processes and to provide additional value to members. One trend we’ve previously highlighted is a growing awareness of the differences in before- and after-tax investing and, in particular, how this relates to the way funds manage their investment portfolios for accumulation members compared to pension members. Portfolio managers for superannuation funds can take advantage of Australia’s tax laws on franked dividends and share buybacks to squeeze out additional basis points of investment performance each year, simply by segregating their post-retirement and accumulation portfolios and by managing each with these considerations in mind. Funds have been slow to take up after-tax investing but we are starting to see the more innovative funds begin to incorporate after-tax benchmarking into their processes as they realise the tangible benefits.
We expect this trend to increase over the next 12 months. In May, the $43 billion AustralianSuper showed us a glimpse of what the future of financial advice could look like when it announced a partnership deal with several financial advisory firms. The one-year pilot agreement, a first for the industry, will see AustralianSuper added to the dealer groups’ approved product lists (APLs). This will enable the dealer groups to recommend membership of AustralianSuper to their clients. It is interesting to note that one of the criteria for the partnerships was the dealer groups’ adherence to a fee-forservice model, which is a key requirement of the FoFA reforms. A number of other funds may be waiting to see how the partnership goes. However this does not mean they are sitting idly with respect to their own financial advice offerings. On the contrary: the provision of financial advice to members is one area where funds have focused their efforts in the past year. They recognise the importance of member retention in an industry where member growth has slowed significantly from levels seen five years ago. The vast majority of funds – not only retail, but industry, government and corporate funds – now provide members with access to full-service financial planning.
With more and more planners implementing a fee-for-service model, members have never been in a better position to easily receive quality financial advice without the hidden fees and commissions that may have marred financial planning arrangements in the past. It is not only those members with complex financial situations that benefit from advice models. A number of funds are now training frontline staff in call centres to provide limited advice to any member who calls up with a query regarding their account. In stark contrast to the outsourcing model used previously funds are bringing a number of key member contact areas – such as call centres, financial planning and insurance claims processing – back in-house. The key benefit of this approach is that funds retain more control of the member experience at all times, as members are best served by fund staff members, regardless of the nature of their query and the level of advice required, as opposed to being passed around from contact centre to contact centre. In fact, control over the member experience has become a cornerstone of funds’ growth plans in 2010-11, providing the ideological backdrop for not only their financial advice offerings but their member engagement strategies as well.