Queensland-based industry superannuation fund Sunsuper has experienced a jump in enquiries from employers seeking to switch funds since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, says Michael Mulholland, the fund’s general manager for advice.
“We’ve never been busier,” Mulholland tells Investment Magazine. He says employers and tender consultants had been calling to discuss changing their organisation’s recommended super fund.
“Employers are unhappy with some of the current providers, in light of the information coming out of the royal commission, and they’re actively seeking to move,” he says. “Whether it’s directly or via a tender consultant, there really is movement in this space and we’re seeing significant new enquiries in this area. We hope to be announcing new wins over the course of the next two years.”
According to KPMG’s 2018 super insights report the corporate sector will experience little or no growth from now until 2028 when it is projected it will hold $76 billion. This is in comparison to the wider super sector which will be worth $5 trillion by 2028.
Despite this, corporate super arrangements are fiercely contested. Last month AMP’s interim chief executive Mike Wilkins conceded there was a possibility more of its corporate superannuation clients to move to not for profit funds, after losing its contracts with Australia Post and Anglican National Super.
Sunsuper has $57 billion in funds under management and 1.3 million members.
Mulholland says pressure on the sector from the Hayne royal commission and proposed changes to insurance within super that came out of the Federal Budget were putting a spotlight on the importance of company culture. Member interests have to come before those of the employer, financial adviser or shareholder, and this should be reflected in the weighting of performance reviews and KPIs, he says.
“The trustee has a best-interests duty and that has to flow through the performance metrics and through to the employees of the super fund. All the way through it should show the best interest duty has been met.”
Retail vs profit-to-member
Mulholland also questions whether the for-profit sector can deliver on the responsibility super funds have in a system of mandatory contributions.
“We have forced savings coming out of the pay packet, it is the member’s money yet before it is even invested they are losing money to pay shareholder returns,” he explains. “Is that ethical? Is that in the best interests of members?”
Having spent the vast majority of his career in the for-profit sector, he says he is “not a zealot”, but argues it is a fact that trustees of banks and retail funds have competing priorities between their members and their shareholders.
He refers to findings in the newly released Sunsuper’s 2018 Australian Employee Insights Report, which finds that 29 per cent of baby boomers surveyed cite ‘not having enough super or savings when I retire’ as the main reason for feeling financial stress.
The results show the importance of seeking financial advice and comprehensive financial advice needed to be completely free of conflicts of interest, Mulholland says. Sunsuper does not have comprehensive financial advisers on its payroll, he says, but it does vet advisers, whom it recommends to clients in need of advice.
“If it’s comprehensive financial advice, it should be an independent financial adviser and may the best fund win,” Mulholland says. “Not what’s on their approved product list or what they’re aligned to or what they’re KPI’d under.”
He says the royal commission “hit the mark” in identifying many problems with the superannuation sector. But he adds that banning ongoing service fees for financial planners will be a “retrograde step” if it comes out of the commission.
“Plans need to be reviewed and need to be constantly monitored and potentially changed,” Mulholland said. “It should not be one meeting, put it in place and set and forget. It’s something that should take you right through to retirement and beyond.”
Sunsuper’s Employee Insights report also demonstrated the responsibility employers have in choosing the right super fund, Mulholland says. The fund’s survey found 70 per cent of respondents trusted or supported their employer’s choice of super. Millennials were more skeptical, at 61 per cent; boomers were the most trusting at 87 per cent.
Despite the assistance technology is providing in putting funds directly in contact with employees, employers are still at the forefront in choosing which funds employees will use, Mulholland says.
Employers also have an opportunity to assist employees in increasing voluntary contributions, he says. With people today likely to live beyond 100, they will need substantially more savings than the currently mandated 9.5 per cent.