The majority of super fund members have balances of up to $100,000 and require “simple” advice, such as how to invest or sensibly spend a lump sum, Baker says. Members with between $100,000 to $500,000 will probably convert their savings into an income stream and need “scaled” advice that can become complex.

The minority of members, whose savings reach and can exceed $1 million, have little confidence in the superannuation industry and will be more difficult to retain. “They’re already thinking about SMSFs,” Baker says. Funds will need to offer full-service advice that competes with the advisers, accountants and private bankers in the high-net-worth individual market.

These expenses are worthwhile because losing these members will “punch a massive hole in your cash flow and assets”, Baker says, and impact an entire fund’s investment strategy. “Each fund will need to work out how its memberships are behaving and what they’re looking for,” Bowater says.“The key to getting it right is understanding different groups of members and what they want.”

Market risk

Some retirees will need to keep part of their savings invested in stock markets to earn long-term investment returns to fund retirements, Bowater says. But funds must be able to reduce market volatility. “There is no point taking a long-term strategy if the member can’t stay with it,” she says.

Lieberman sees a growing appetite for products that insulate investors from market and longevity risk. He says funds can partner with insurance companies that allow them to retain members while drawing on the strength of an insurer’s balance sheet.

Such products can form part of relevant advice models customised to the needs of different groups of members. Members with lump sums between $100,000 and $1 million will likely ask for protection against market and longevity risks. Lieberman says lowcost, capital-guaranteed products can be developed to meet this need.