Some members are excited for retirement, while others approach it with a “real sense of shame and fear”. Funds are going to have to figure out how to cater to both groups or risk failing them all.
If there’s one lesson for investors from the past five years, it’s that chopping and changing their strategy – even in the face of massive market turmoil – doesn’t always pay.
… and administrators can also add value in the process
Changing the behaviour and processes of a big organisation, such as a super fund, is never easy. There are usually several stakeholders involved who need to be convinced of the changes, including, arguably the most important, the humble administrator.
At the PwC/Parametric roundtables on investment efficiencies last week (see separate report), Shannon Goard, the national head of product for Link Group’s super admin business, referred to the potential benefits as “the power of one”.
“We are able to crunch and analyse enormous amounts of data,” he said. “Our data analytics capability has grown incredibly in the past 15-20 years… It’s now the power of one in terms of the tax planning benefits we can offer for individual portfolios within a super fund.”
Goard said: “We can have individual shares tracked and specific tax lots and outcomes allocated at the member level via the member direct investment option that we have integrated into our proprietary registry platform Aaspire.”
The recent industry focus on Link, which owns the fund administrator AAS and has this year absorbed SuperPartners, has been on the benefits of scale for members, given Link’s bid to purchase the NSW Government-owned Pillar Administration.
However, as Goard said at the Sydney roundtable last week, the “base contract” for super funds with their admin, custody and investment management mandates has become very much more complex in recent years.
“Security has become a big issue,” he said. “When you have 10 million accounts, like we do, it attracts people’s attention so there has to be a lot of emphasis on security.”
He said that administrators needed to continually re-invest in their technology and digital platforms. “The scale we have, which looks really big, doesn’t mean we have simple solutions. We get involved in all ways to save members money,” he said.
The segregation between members’ accumulation phase and their pension phase, as Link has done, allows for more efficient bespoke administration for the two main classes of members.
Administrators are particularly important in the management of cash, given they are the first contact point in the payment of contributions. Sometimes a super fund will have several bank accounts and have different sets of instructions as to how the money needs to be handled on a daily basis.
As with after-tax investing, the difference between efficient and inefficient cash management can be more than 50bps a year.
Goard points out that administrators also have a part to play in the identification of and handling of “lost or unclaimed” money, which does not have anything to do with scale. Reducing the number of accounts adds to the efficiency of the system by cutting the overall costs.
