Some retail providers have deliberately held back their MySuper applications so as to differentiate themselves from industry funds, an analyst has claimed.
Nigel Pittaway, managing director insurance and diversified financials research, Citi Research, said retail providers were under pressure as they were having to squeeze margins to compete with the low fees of industry funds, in a speech at Frontier Advisors’ annual conference in Melbourne.
“There is an attitude among some of the retail funds that they should not go in too early, at least one has expressed to me that their strategy is to wait until the last moment.”
He added that part of retail funds’ approach to gaining assets under management was to launch more than one fund.
He cited AMP as a key example, with one fund catering for its existing business and another competing with industry funds on fees. By 2017 all retail superannuation business must move to a MySuper format and this would squeeze the margins of providers Pittaway predicted.
Kim Bowater, senior consultant, Frontier Advisors, cited figures that backed up Pittaway’s hypothesis. She said that of the 41 MySuper applications so far approved, 33 were industry funds, five were government run, two were retail and one was for a corporate fund.
Bowater’s analysis were that most products were a confirmation of the funds’ existing defaults, but that these might turn out to be ‘phase one’ products, that will evolve over time.
Of the retail products she had seen, such as target date fund offered by Colonial First State, were largely competing on the basis of low fees.
She added that the market was still not properly addressing the transition of members into retirement.
“For the near retirement people we need to think about narrowing the range of outcomes and reducing the downside risk.”
