Industry funds will not own the low-cost space post-Stronger Super and the industry should be prepared for the influx of bespoke products like SMSFs and individually managed accounts (IMAs), said Paul Watson, executive manager of member choice and advice at Hostplus.
Speaking at last week’s Post-Retirement Conference, held by Conexus Financial in association with AIST, he said the fund has made “a very conscious decision” not to compete in the low-cost space.
“…That’s not going to be what we’re going to be known for. We’re very much going to play to our strength of value. Our net-benefit outcome has been compelling and strong, and we’re going to continue to compete on that basis,” he said in a panel of retail and not-for-profit participants discussing the new landscape post-Stronger Super.
Fewer moving parts
Watson said Hostplus does offer a product for people who “want to hit the elevator button and go down one level to cost”.
“I’ve got an indexed-balance product that costs four basis points. But I don’t think that that’s the best outcome for the majority of our members. It’s really about the net benefit and our best ideas vessel, and that is our active balance option, which will be our My Super option.”
Watson said there are low-cost products available that are lower in cost than many industry funds.
“I would argue that there are fewer moving parts to them, and we could have a discussion and a debate about likely outcomes down the track with the way they’re set up investment-wise. But they are very compelling, low-cost, simple, easy to understand products.”
Honouring the shelf space
At the other end, he said, are bespoke choice products – namely, SMSFs – and he says Hostplus is preparing itself for the IMAs “coming down the pathway in Australia in a big way”.
“There’s obviously some very good wrap platforms and corporates in that space.”
Watson said the reforms, on the back of Jeremy Cooper’s 2010 superannuation industry review, were not as Cooper had intended.
“It’s the Y2K of super,” he said. “I think this My Super licensing process – and let’s not kid ourselves, it’s a re-licensing process for many funds – is Darwinian in that I think we’ll see far fewer funds than we’d imagined come out the other end as part of this process.”
Watson believes some retail superannuation funds won’t bother applying for My Super because it’s “100-per-cent choice and they don’t see a need for it”.
Referencing a previously heard analogy, Watson likened super fund offerings to bread.
“Where we’re heading for in this post-Stronger Super world, we’re going to have those who build the white $1 loaf. Simple, people get it, cost effective…
“At the other end of the spectrum, we’ve got these artisan loaves. They’re beautiful and they taste wonderful and they cost $8, and there’ll be people who will want that. They’ll see value in that,” Watson said.
He flags Hostplus carving out a new proposition in that “compelling” space in the middle – “the sort of $4 Helga’s loaf space”.
“We’re not quite the $1 loaf and we’re not quite the artisan loaf, but we are trying to honour the shelf space that people might want to engage with us in, so that’s what we’re sort of developing for.”
