(Pictured: Jason Clarke)
It looks like, according to SuperRatings data, that when the final 2013 numbers are in, this year will be the first ever that there is negative growth in the memberships of Australia’s large super funds. If funds don’t do something about their membership leakage they will inevitably go into a slow decline and be forced to merge.
Jason Clarke, the managing director of SuperRatings’ parent company, Lonsec fiscal, said last week that the membership growth of APRA-regulated funds had been in decline for the past five years. Indications were that this year would be the first, ever, that membership growth would be either negative or close to zero.
Clarke was commenting on the background to his company’s entry into the provision of Member Directed Investment Option services, with the announcement of Lonsec’s first super fund client for an SMSF-style platform, the $5.2 billion Melbourne-based Catholic Super Fund.
The provision of member-directed platforms, which go by various names including ‘gateways’, is gathering pace as a way to possibly stem the loss of high account balance members to the SMSF market.
Big funds to have introduced or are planning to introduce such a platform include AustralianSuper, HostPlus, CARE Super, LegalSuper, QSuper and Telstra Super. Some have gone direct to the provider, as Catholic Super did, while others have accessed a service via the administrators AAS or Pillar.
The providers which have so far won business are FNZ/UBS, which has the biggest penetration, Macquarie and, now, Lonsec. But several others have pitched for business. Comparing their offerings and systems capabilities is difficult. Even pricing can be dialed up or down for different clients. For instance, most providers will offer a service to a fund for no upfront cost if they can clip the ticket, with differences in potential administration and brokerage charges to the members. A broker has to be attached to the service, although at least one provider, SuperIQ, allows a choice of broking services including online or discount broking. The broker also needs a cash account for trading, with varying amounts of interest paid.
The two key differences, however, between a super fund member-directed option and the average accountant-administered SMSF are the fund’s trustee umbrella, also allowing cheaper group insurance, and a much lower cost of the admin.
Lonsec’s Clarke said that it had been evident for several years that funds needed to focus on delivering better options for members with higher balances in order to retain them.
“We developed or acquired the latest technology we could find, including designing from the ground up for mobiles and tablets,” he said. “Because the members are moving from a unit price or crediting rate environment, we designed a whole range of pre-trade warnings, such as when capital gains tax would be triggered.”
It is up to the fund to decide the business rules, however, such as the breadth of investment choices and possible minimum balances required for a member to be eligible.
The Lonsec service accommodates super and non-super and backs in the broker’s advice as well as Lonsec research. It can be fully branded by the fund. Lonsec brokers operate on a business-to-business model so the member will usually deal through his or her own adviser or the fund’s advisers.
It runs in a single HIN and multiple HIN environment, which means there is no need to appoint a separate custodian, which would require an APRA exemption. Catholic Super’s custodian is NAB Asset Servicing.