High returns help, but what’s more important is trust, accountability, and making sure that the remuneration structures aren’t “really cheeky”.
Capturing structural growth potential is not easy, but in uncertain markets, it’s essential, according to Ninety One. Investors are eager to explore the opportunities in artificial intelligence, and exposure to higher quality companies can successfully position them for an AI-driven future.
… and now, the latest theme is all about ‘outcomes’
The latest theme for big super funds to consider, according to Chant West, is a focus on the outcomes of members in retirement, taking the lead from APRA’s new outcomes assessment. This is actually a seismic shift for the institutional part of the industry. It enjoins member services with investment strategies and their implementation.
The next Chant West Awards will focus on this theme in the judgement of candidate funds (see separate report above). The industry actually exists to provide income to retirees.
For big super funds and their managers, the shift of focus to retirees – as well as – accumulators, is a big deal. Here’s what Chant West thinks about the trend.
Chant West has historically dissected a major trend ahead of its annual Awards. And the trend has tended to be an increasing focus for big super funds over the subsequent year. This year, it’s all about focusing on retirement incomes, and many fund managers and other players are looking to provide services to the market – both good and bad.
Ian Fryer, the Chant West head of research, says: “Superannuation exists to provide income to Australians to either replace or add to their age pension. We believe that this is where the industry should be focused. This year’s Awards will highlight what funds are doing to help members towards the best retirement income.
“Clearly, high quality investments are an important ingredient to achieve good outcomes for members, and this will again be a leading factor in our assessment for several awards. But engaging members and nudging them to take action to grow their super can also improve outcomes for members. This is generally best done when funds use all their data to understand what each member can do to improve their situation and then help members to take that action. This year’s awards will look particularly at the use of data and digital engagement channels to drive behaviour that improve member outcomes.”
In an interview coinciding with the announcement of the 2018 Chant West Awards finalists, Fryer said: “The most important question to ask is: ‘what can super funds do that leads to good outcomes for members’.
There were two main drivers for these outcomes, he said:
- Investments: what will help them in their retirement. Investment strategies need to be robust, with proper diversification and an appropriate return profile, and with the right people from the fund making investment decisions.
- Member services: this is about what funds can do to help members achieve these outcomes, including things such as promoting salary-sacrifice additional contributions and a thoughtful allocation across options if they elected to go down that route.
Fryer said that funds, in general, were getting better at using data, which is becoming more readily available from the big super fund administrators.
One of the outcomes of this trend has been better engagement with members based on their particular circumstances. There were a range of models in evolution, Fryer said.
“Many funds are investing a lot of money in member services for investor retention,” he said. “The efforts of retail funds, in particular, have been quite successful. However, we would like to see just as much attention given to highlighting other steps members can take to improve outcomes such as additional contributions, retirement adequacy and investment choice. “The best industry funds, in particular, are doing a good job at understanding the best action for each member and communicating it to them effectively.”
With respect to the past encroachment of SMSFs on the big super fund space, with high-balance members the most likely to leave their fund and start their own, Fryer said that the industry was “probably seeing a slowdown” to the trend for members to depart their big funds for and SMSF alternative.
He said: “At the end of the day, we have to ask ourselves: ‘why does the industry exist?’. It’s about providing a whole range of services, from investments to engagement activities and advice that will improve income in retirement. Those funds that are focussed on improving member outcomes through all that they do will succeed in our awards.”
