Retail funds most at risk from SMSFs
CoreData has examined the challenges of member retention in larger super funds, with findings indicating retail funds are most at risk from SMSF outflows.
In terms of leakage to SMSFs, retail funds have lost the largest proportion of members to this segment, according to CoreData.
“In particular, those that through our behavioural segmentation are defined as controllers and outsourcer SMSF trustees are more likely to have come from retail funds than from other sectors,” said the research group’s head of advice, wealth and super, Salvador Saiz.
Fees and returns are the main drivers of super fund switching, each cited by around two thirds of the 1,585 respondents to CoreData’s Member Retention Report as key features that a fund would need to focus on to retain members.
Large funds have focused on introducing direct investment options (DIOs) to combat the greater choice and control offered by SMSFs, but CoreData found that while DIOs are desirable for members, they are relatively ineffective in terms of member retention.
Just over half of respondents said they are likely to use DIOs, but access to direct shares and term deposits does not rate highly as a retention tool, CoreData found.
“However, in the battle to combat the leakage to SMSFs, the study does indicate that DIOs could be key, with more than half of those likely to establish or set up an SMSF, indicating they would reconsider such a decision if their fund offered a DIO,” Mr Saiz said.
Funds are already looking beyond DIOs in the quest for member retention, offering services such as mortgage broking and partnering with specialist SMSF providers, CoreData found.
However, Mr Saiz also said the bulk of switching between funds by members has actually benefited industry funds as a segment, and that will continue to be the case.
“Of those looking to switch going forward, about four in 10 (42.2 per cent) are likely to move to an industry fund,” Mr Saiz said.
“This is followed by almost one quarter that will move to an SMSF. At a fund level, those funds mostly likely to benefit from switching members are AustralianSuper, AMP, MLC, HESTA and Colonial First State, respectively.”