GUILDSUPER CHOOSES NEW ADMINISTRATOR

10 News

www.fssuper.com.au

Volume 13 Issue 02 | 2021

GuildSuper chooses new administrator

Elizabeth McArthur

GuildSuper, the $1.8 billion retail fund catering to childcare workers, has chosen a new administrator which it says will enhance member experience.

GuildSuper, which also trades as Child Care Super and offers Guild Pension for retirees, was slated to switch to IRESS in May.

Previously, GuildSuper outsourced its administration to Mercer.

A significant event notice to both Guild Super and Child Care Super members explained that by using IRESS as administrator, the fund could enhance its digital offerings.

Members will be able to make contributions by direct debit by logging in online, they will be able to submit requests to change investment options or personal details online and will be able to receive electronic communication from the fund.

The fund had also previously offered members access to Mercer Financial Planning services. With the change of administrator, members will no longer have access to a personal advice service. Rather, GuildSuper provided members with a phone number for general advice enquiries.

Meanwhile, GuildSuper also altered its investment fees – resulting in slightly lower fees for most options. For example, the Building and Growing MySuper options fees decreased by one basis point each and the Consolidating MySuper option investment fee decreased by three basis points.

Additionally, GuildSuper changed its policy on partial rollouts. Members can now only partially roll out their balance to another super fund if at least $6000 stays in their account. fs The quote

We have an obligation to our members, to consider the benefits of a potential merger and to proceed with that merger if it is in their best interests.

EISS Super, TWUSUPER explore merger

Kanika Sood

The two industry funds have signed a memorandum of understanding to weigh a potential merger.

In a joint statement, they said they will commence due diligence, and initial discussions have been “very positive”.

If the merger proceeds, the combined fund will have about 130,000 members and $12 billion in funds under assets.

“We have an obligation to our members, to consider the benefits of a potential merger and to proceed with that merger if it is in their best interests. It’s early days, but we’re seeing a lot of potential benefits for members, so a merger looks promising,” EISS Super chief executive Alexander Hutchison said.

TWUSUPER chief executive Frank Sandy said: “Although early in the process, there appears to be a strong synergy between the funds operationally, which should translte to better member outcomes, as well as an alignment of our values and culture which is important for members.

“This merger can provide greater scale for both funds and has the potential to deliver cost savings to members across trustee services, administration and investments, while also providing members with better services, solid long-term investment returns and improved financial outcomes at retirement,” Sandy said.

EISS Super's MySuper option has returned: 3.8% over the year to February, 5.6% p.a. over three years, 7.2% p.a. over five years, 6% p.a. over seven years and 6.7% p.a. over 10 years.

TWU's MySuper has slightly better performance: 7.1% over 12 months to February end, 5.7% p.a. over three years, 7.9% p.a. over five years, 6.8% p.a. over seven years, and 7.4% p.a. over 10 years.

Both are below the median MySuper option's annual returns of above 8% over all time periods mentioned.

In February, the Australia Post Superannuation Scheme (APSS) signed a non-binding heads of agreement to explore a merger with Sunsuper, which is committed to a merger with QSuper to create a $200 billion plus fund.

Aware Super signed a Memorandum of Understanding with the $855 million Victorian Independent Schools Superannuation Fund (VISSF). Aware last year, completed mergers with VicSuper and WA Super. fs

Institutional mandates shrink in 2020

Local institutional investors appointed 313 mandates totaling $43 billion in 2020, down from $51 billion the year before, according to Rainmaker’s latest Mandate Chaser report.

State Street was the biggest winner in institutional mandates in 2020, taking $5.1 billion from institutional investors, mostly across local and global equities.

IFM Investors was next, winning $2.5 billion. Majority of this was across international equities and alternatives ($1 billion each), with smaller wins in cash, fixed income and Australian equities.

It was followed by Macquarie ($2.4 billion), Alphinity ($2.1 billion), Lend Lease ($2 billion), First Sentier ($1.7 billion), WMC ($1.5 billion) and Robeco ($1.5 billion).

Rainmaker’s Mandate Chaser report collects mandate data via investment surveys with non-profit superannuation funds (including industry, corporate, government funds), investment managers who appoint sub-advisors and implemented consultants.

By asset classes, the individual managers winning the most mandates were: Australian equities (Alphinity, Macquarie and Hyperion), international equities (Robeco, State Street, BlackRock), Australian fixed income (Macquarie, Ardea, Coolabah), alternatives (LGT, Ardea and IFM).

Asset consultant Frontier was associated with the mandates.

Superannuation funds Australian Catholic Super (34, up from 23 in 2019), Aware Super, ESS Super, LGIAsuper and NGS awarded the most mandates in the year.

Hostplus awarded the most mandates in 2019 with 35, but in 2020 it only gave out 12. fs

www.fssuper.com.au

Volume 13 Issue 02 | 2021

Opinion

11

Andrew Baker

partner, NMG Consulting

Zuper's end and D2C entry hurdles

The closure of superannuation challenger Zuper is a reminder of the difficulties of making a successful D2C [direct to customer] entrance into super and wealth in Australia (and indeed elsewhere).

Entry success stories exist for offers with adviser channel distribution – particularly platforms such as Netwealth (now >$10 billion in super AUM) – and for new advice and asset management propositions focused on wholesale segments. The post-Royal Commission fragmentation of bank and insurer-owned wealth businesses has shaken loose customers and advisers, which has helped entrants gain traction.

For D2C focused entrants, success has been hard to find. There's something poignantly sad about it. Often launched by enthusiastic management teams in a blaze of publicity, armed with the belief that consumers were waiting for new propositions, on a mission to take on the big dinosaurs of collective super...but so far the dinosaurs have been pretty much untroubled. The anticipated pent-up consumer demand for new offers has largely failed to materialise. Some entrants also found operational execution much harder than expected.

Failure wasn't for lack of passion, that's for sure. Some years back, I was almost lynched at a Brisbane fintech panel by an audience of zealous would-be disruptors, when I predicted that most D2C entrants at that time were doomed, unless they pivoted to B2B (business to business) (well done, Grow Super). Some D2C entrants had technology or IP [intellectual property] which big super incumbents need, and a B2B strategy of supplying, rather than competing, always looked more likely to pay off.

Why is a successful D2C entry in super so hard to pull off? • Yes, it's a huge market, tick. But it's highly concentrated – a relatively small percentage of customers has a majority of assets. Those segments are attractive. But some have SMSFs and are likely uncontestable. For those in existing collective funds, you need to find and acquire them amongst the very long tail of small and unprofitable customers. • Industry product margins are just not that high. The days of 2-3% MERs [management expense ratios] are long gone on new business. There are legacy products still in this zone, and SMSFs can offer a rich value chain, but collective super typically works on a total cost ratio of well under 100bps and falling. That doesn't leave a lot of room for a materially lower price offer (particularly for an entrant without scale which can't spread rising fixed costs such as regulation widely enough). If anyone can pull that off, it will probably be Vanguard in its second attempt – we shall see soon enough. • Investment performance has been pretty good: no low hanging fruit here. It's not hard to find a well-performing collective super fund; indeed industry funds position on strong performance. So there's not a lot of room for a materially better performance offer either, unless much higher risk is involved. For example tech stock strategies at the

The quote

...I was almost lynched at a Brisbane fintech panel by an audience of zealous would be disruptors, when I predicted that most D2C entrants at that time were doomed... saner end, SMSF crypto strategies for hose feeling lucky. • Super is not a high engagement product category for many. It's compulsory, it's jam in the distant future, it's pretty boring – not exactly a recipe for winning the competition for customer attention vs their next holiday, or indeed most anything else. A favourite quote of mine is from an FT journalist who described cleaning the lint filter on their clothes dryer more appealing than reviewing their pension arrangements. A recent FCA (Financial Conduct Authority) report on UK self-directed investors describes three archetypes: "having a go", "thinking it through", and "the gambler". None of those archetypes are particularly likely to back a new D2C super entrant, other than high risk offers to the gambler archetype.

Thanks to all of the above, D2C acquisition costs are punishingly high. There is useful UK data here too. The UK features a big and highly profitable D2C success story in Hargreaves Lansdown, but most entrants (including Schroders' original Nutmeg proposition) have experienced years of losses, and acquisition costs which imply needing to retain customers for many years before achieving break-even. fs To keep reading go to fssuper.com.au.