Chant West, in partnership with Conexus Financial, publisher of Investment Magazine, will present the second annual superannuation and pension awards on May 21, at the Ivy Ballroom in Sydney. Both companies have a common vision of improving retirement income solutions and producing better outcomes for members and in the process calling industry participants to account for their actions.
The inaugural super fund awards were a huge success, based on the feedback from many of those who attended the black tie awards evening last May. There was a lot of favourable comment about the professionalism of the evening, the appropriateness of the awards and the winners, and the way Chant West explained their rationale for shortlisting funds and choosing the eventual winners. The focus was clearly on recognising and rewarding those funds in the superannuation industry who have achieved excellence and are doing a great job for their members.
The focus of this year’s awards will be no different. Chant West will again ‘name the names’ of those they believe to be the very best funds in the industry. Once again, there will be 10 awards as follows.
Super Fund of the Year
Pension Fund of the Year
Fund of the year
of the Year
Best Fund: Investments
Best Fund: Innovation
Best Fund: Integrity
Asset Consultant of the year
This year the Best Fund: Insurance award is being replaced with a Best Fund: Innovation award. The insurance industry is currently in turmoil. Many funds have their insurance up for review over the next 12 months and in many cases premiums are likely to increase substantially. Reinsurers are deserting the market because of much higher than expected claims experience, which is bringing the industry’s pricing structure into question. In these circumstances, an insurance award just doesn’t seem appropriate.
But an award for innovation is very appropriate in a year when MySuper has become fully operational. Many funds, mostly retail funds but also a handful of non-profit funds, have introduced lifecycle products. While there is still much debate about the suitability of different designs, they are certainly an innovation for the industry and a step in the right direction. This year, the innovation award will focus on these products, and there are several high quality candidates to choose from.
Chant West will use substantially the same criteria as last year to determine the award finalists and winners. But this year, understandably, there will be a focus on the impact of MySuper. Clearly, we now have a new disclosure regime which should lead to greater comparability of fees across MySuper products. Those funds that have embraced full disclosure will be rewarded.
Investments will also be affected by MySuper. It has been interesting to see just how much funds have changed their approach to investing because of the need to produce a so-called simple, low cost product. To meet this challenge, many retail funds, in particular, have launched products that are substantially passively managed. The question is will they perform as well as the highly successful default options of industry funds that are substantially actively managed and very well diversified. All of these issues will come into the mix in determining which funds are the best.
Investment governance has also been elevated to an issue of particular focus. Many funds have now reached a size where the complexity of investing has outgrown the traditional model of decision making – a relatively small internal team working closely with the fund’s asset consultant and overseen by an investment committee or board.
MySuper has had a positive effect on investment governance in that all funds have had to consider and clearly articulate their governance structures. As a result, many have made significant changes to how they make investment decisions – or, more particularly, who is actually responsible for making those decisions. And, pleasingly, we are seeing more instances of the right people being given more responsibility. These will be important considerations in choosing the best funds.
Fees and investments, of course, are key criteria in evaluating funds. But Chant West believes that member services are not too far behind. They subscribe to the view that, while investment returns are a key factor in determining the size of a member’s eventual nest egg on retirement, it is just as important for the member to understand how big that nest egg ought to be, whether they’re on track to achieve it and what actions they might take if they’re not.
Retirement calculators are more important than ever in helping members understand their retirement goals and whether they are on track to achieve them. The best funds are those that provide their members with user-friendly calculators they can use to model their situation realistically and make the right decisions to achieve their goals.
The best funds then go a step further and use this functionality to show members on their annual statement whether or not they are likely to have a retirement income gap, ie an income that is less than they need to enjoy a comfortable retirement. Funds that embrace this approach to helping members fare well in Chant West’s evaluation process.
Member segmentation is also a key area of focus. Different groups of members (cohorts) have different needs and respond differently to varying forms of communication. Those funds that make the effort to categorise their membership intelligently so that they can communicate effectively are also rewarded in Chant West’s evaluation process.
Chant West Super Fund Rating Criteria
Member services 25%
Within those criteria there are sub-criteria listed below.
Investment governance 20%
Portfolio management 20%
Capital markets research 20%
Manager research 15%
Past performance 15%
Investment choice 5%
Frequency of valuations 5%
Communication materials 40%
Financial advice services 20%
Retirement calculator 40%
Public website 40%
Secure website 20%
Member statement 65%
Newsletter/annual report 35%