George Fishlock is the chair of AvSuper and well known by members in the tight-knit industry of air traffic control services. Investment Magazine reports on what a close relationship with a membership can enable a fund to do.
Walking around the Airservices Australia building at Melbourne Airport, the hub controlling flights over half of Australia’s airspace, many people greet him by name and share stories of the daily operations and their favourite sports teams with him. They also recognise him as the chair of their superannuation fund.
AvSuper’s members make it is an outlier compared to other funds. It has $2 billion of assets, 11 members of staff and 6,500 members. The average member balance in the defined contribution side is well over $300,000, while the defined benefit section, which is about 50 per cent of the fund, has an average member balance over half a million dollars.
When the fund write cheques to its few leaving members it is often seven figures, but most members make the conscious decision to stay with AvSuper.
“Our membership is committed to us, they’ve had choice available to them for at least five years and most have not moved,” Fishlock says. “Furthermore 77 per cent have exercised investment choice within the fund and are not in the default investment option.”
Having an engaged and educated membership, who sit next to each other day-in and day-out, keeps the Trustee very conscious of members’ needs, because “if there’s a better offering they would walk out the door tomorrow,” says Fishlock.
Member data
One of the reasons the membership is so engaged is that the fund has a deep and evolving understanding of member needs, making it a good case study into the usefulness of having wider and holistic data sets.
The fund has one major employer and several hundred smaller employers from the aviation and aviation safety industry. Because they know the type of members, their employment history and the way that their members’ careers will progress, AvSuper understands at what particular points there’s a need for superannuation services and advice.
For example, since the average member has a very high account balance, most won’t be able to access the age pension, as they are far beyond the assets and income tests, so the way they manage their own finances is going to be critical to their financial success in retirement.
With this in mind, as of last month AvSuper has extended its financial personal advice service to provide a full in-house financial planning service to members.
Even though the fund has an engaged, educated and interested membership, a lot of them still don’t know what to do with the money.
“Not being their job, it hasn’t been their business, and it’s been a real challenge for them to know what to do, but it’s also comforting that they’ve got people they can call in our organisation – rather than an external company – to be able to provide that insight,” Fishlock said.
The fund has three fully qualified and censed financial planners on staff serving the 6,500 members which also supports the inhouse call centre. Fishlock says the fund has always been clear minded that you cannot outsource the customer service of your client base and has maintained an internal client service model for many years.
“When you’ve got two million members there’s no chance that you can hire enough financial planners to talk to all those people,” Fishlock explained speaking of the scale advantages of the fund’s membership size relative to its large assets under management base.
Previously the fund did subcontract the provision of advice to an outside organisation, but it proved unsuccessful as “they were more interested in trying to divert members into their sort of products”.
As a result Fishlock says much time was spent trying to repair the damage. He doesn’t think there’s going to initially be a huge rush for the service, as the members are well informed and educated up to this stage, adding that they are not starting from scratch as super is talked about in the air traffic control training centre and in many of the employer staff induction sessions from the week they start.
Investments
The only in-house investments AvSuper is prepared to manage is cash in term deposits. Aside from cash investments, which have generated better outcomes than might be had by an investment manager over the last 3 years, the Trustee’s investment belief is that if they are seeking to make investments for the best benefit to members they should be seeking the best possible investment managers in the world. Fishlock argues that if you come in-house with other assets you face the “very real prospect and run the genuine risk of an underperforming internal team”.
“It’s very easy to sack an external manager if they don’t perform, but it’s extremely hard to sack an internal team if they don’t meet the same criteria,” he says.
There has been a major move over the past two years in the way that the defined benefit portion of the portfolio is constructed because of the significant surplus of assets over liabilities in that section of the fund.
A few on the trustee board were around in the GFC when the prior defined benefit surplus disappeared with a significant fall in investment markets and asset valuations.
Those who saw all the angst and all the concern at that time are now very conscious of the same scenario recurring in the future.
The fund has worked over the last couple of years on a comprehensive investment strategy review of the defined benefit section to ensure that the DB asset, which was closed to new members in 2002, remains fully funded, and no employer “top ups” are likely to be required.
“We’ve got a DB fund that is closed and running down, currently sitting at 50 per cent of the fund. We no longer need to have the same exposure to equities in particular that we’ve had in the past and we’ve worked very heavily on moving away from those more traditional types of asset allocation,” says Fishlock.
