Super funds will be offering home loans and credit cards to members by the end of 2015 and are already “well down the road” in developing these platforms, a market data research specialist said.
Andrew Inwood, founder and principal of Coredata, said that he was having conversations with super funds about these products and how they will be distributed, with another source confirming that development was taking place, but that no model had been settled on.
“Many young members aren’t engaged with super but do take an interest in credit cards and home loans. This is one way for funds to increase ‘the presence in the pocket’ with them,” Inwood said.
He added funds traditionally have only been able to grow at the natural rate of employment growth. Last year this was less than 1 per cent and with Australia’s changing demographics employment growth could easily slip into the negative territory, which could have a dramatic effect on contributions levels. For example, it’s predicted that NGS Super and Equip Super will have around 50 per cent of their account balances made up by retirees by 2020. Taking members from another fund is the only way to grow in a nation with a shrinking workforce, if a fund relies on a strategy of membership growth.
However, “if funds offer financial services they can tap into growing markets” and continue to expand. Inwood describes this as the “race to the middle” as super funds head towards the territory typically held by banks. He noted that the differentiation between all financial service providers is decreasing rapidly.
He also remarked that funds, in addition to normal avenues of distribution, have some unique advantages, namely the networks of “work place visits” and “financial planners” which can be tapped to promote the products. He predict the smaller funds, with their ability to be nimble, are likely to be the first to offer these products, though no fund has yet gone on the record confirming a release date.