AustralianSuper has declared bullish growth projections for its direct investment option (DIO) from 12,500 to 50,000 members as its retirement membership grows.
The platform, which gives members the freedom of a self-managed super fund in an insured setting, currently manages $700 million for 12,500 members, who hold a further $900 million with the main fund.
Speaking at the Australian Institute of Superannuation Trustees’ Australian Superannuation Investment conference, Paul Schroder, group executive of membership at AustralianSuper, cited projections of growth to 50,000 members over time on the back of growing trends for personal choice and from new product features.
By the second quarter of next year, the option will contain a pension selection and the platform will be made open to financial advisers to use for their clients.
“All advisers would want this for their retired clients,” Schroder said.
The fund also plans to eventually make direct property options available, though it would stop short of offering loans.
In a bullish presentation to delegates from a panel on which the chief investment officers of CareSuper and HostPlus were noticeably less fulsome in support of their DIOs, Schroder said that even if AustralianSuper put its fees up for its DIO, it would still be only 25 per cent of the cost of a platform in the retail space.
It is imperative for funds to offer this option in order to retain members, he said, and it will also appeal to those leaving SMSFs, particularly those disillusioned with low term-deposit rates, pointing out that for every four SMSFs set up, one is closed.
“If your members want this to be produced, the biggest risk is not doing it,” he said.
Delegates pressed Schroder on the justification of the fund paying millions of dollars for an option that was only predicted to be used by 15 per cent of its members.
He answered that the fees charged to users would pay for the option over and extended period and that the fund had spent a lot of time preparing the logic of its move for the regulator.
Part of its work with the regulator has been around determining minimum levels of stock diversification. He predicted that in a MySuper environment, such explanations to the regulator would become harder.
The platform, which is provided by UBS, will soon tell users how well strategies are performing relative to the AustralianSuper balanced fund – Schroder said they are also considering telling DIO users how well they are performing relative to other users of the platform.
Telstra Super has become the latest fund to launch a member direct investment option, launching a platform hosted by UBS.