Industry superannuation funds are moving ahead of retail funds in both employer and member contributions according to new research from advisory group NMG.
The retail funds ought to be moving ahead as baby boomers move into retirement because wealthier people nearing retirement were traditionally more likely to be in retail funds than industry funds, NMG notes in its Trialogue publication.
However, NMG notes, things are changing. “It looks as if the opportunity might just pass the retail funds by. We are several years into the retirement boom and instead of making progress, retail funds (primarily bank owned) are going backwards. ”
“The retail segment has been losing around 1 per cent of market share every two years. Four out of the big five retail providers are shedding market share at an alarming rate.”
“Industry funds have been the winners, hands down, increasing their share by 1.5 per cent over the last year alone and are clearly encroaching on retail territory. To put some context to these figures, if the market shares had remained stable, retail funds would be a $120bn bigger today.”
That would make the total for retail fund assets $733 billion, not $613 billion as it stood in December 2017. These contribution figures in part explain why the industry funds under management are growing so quickly, up 18.2 per cent to $589.8 billion in the year to December.
Public sector funds grew second fastest at 9.7 per cent to $439 billion while retail funds grew more slowly, by 7.7 per cent. Self-managed super funds continued to slow with the sector recording a 7.5 per cent rise in its asset base for the year. However they remain the largest single segment, with $721 billion in assets, largely because they appeal to high net worth individuals and businesspeople.
“Even on very conservative figures, this is around half a billion dollars of missed revenues. The spoils aren’t being evenly spread between the industry fund comrades, however.
How are they doing it?
Oliver Hesketh, partner with NMG, told The New Daily that the flow path of monies into retail funds was being disrupted. “It use to be that as people with higher balances got close to retirement they would go to advisors who would direct them into retail funds.”
“Now they are not going to see advisors so much as the industry funds provide some advice to members, not just to employers as used to be the case.”
“Industry funds are slowly, steadily doing a better job of serving their members – and they are being rewarded with what is probably their natural share of flows.”
The retail funds may boost their efforts to harvest more funds, especially as the banks sell out of their wealth management businesses, leaving them in the hands of specialist groups, Mr Hesketh said. “In recent years the costs of complying with regulatory change has been heavy for the retail funds and the pause in that will give them more to spend elsewhere.”
The growth in industry funds is disproportionately being shared by the just five funds (AustralianSuper, UniSuper, REST, Sunsuper and HESTA). They now account for nearly 21 per cent of pooled funds under management, up from just 16 per cent five years ago.
“The other medium-sized and smaller funds are, in aggregate at least, just treading water,” NMG said.
*The New Daily is owned by industry super funds