by Greg Bright
For big profit-for-member super funds, good investment performance is a given. They have delivered for a long time. It’s the member services area which is top of mind. In the first of two articles based on discussions with senior executives of the finalists in the 2019 Chant West ‘Super Fund of the Year’ award, we discuss the things that matter most for Australia’s biggest funds.
The big theme this year for most, if not all, of the 10 Chant West finalists, all of which are profit-for-member funds, is how to engage with and provide for members at both ends of the spectrum: the newbies entering the workforce and others who are looking to switch mid-life at one end of the spectrum and the retirees and those approaching that time at the other end. Given each fund has hundreds of thousands – if not millions – of members, it’s no easy mission.
The themes around member services can be distilled into two main things:
- digitalisation, which is particularly important for the newbies entering the workforce, and
- honest and sound old-fashioned financial advice, which is particularly important for members approaching, or in, retirement.
It’s all pretty much about engagement. In the wake of the Royal Commission, engagement by profit-for-member super funds has taken on a new hue. But, according to most of the Chant West top-10 funds, there is no room for complacency. They all see they have to continue to carry the torch for what is right for their members.
The top 10, in no particular order, are: First State Super, UniSuper, Cbus, CARE, QSuper, HostPlus, REST, Sunsuper, HESTA and AustralianSuper. We profile and interview the other five funds for next week.
Deanne Stewart, the newish chief executive of First State Super, who has presided over a decision to merge the fund’s previously separate financial advice arm, State Plus, says that “financial planning is at the heart of our strategy”. She says: “We really want to be known for education, guidance and advice.”
Stewart, who succeeded Michael Dwyer at the helm after his retirement late last year, says the purchase of State Plus, for a reputed $1 billion in 2016, was made always with the intention of integrating the two businesses. Damian Graham, the former CIO at State Plus, for instance, was made CIO of First State Super not long after the purchase. And Graeme Arnott, the former deputy chief executive of First State Super, was made chief executive of State Plus for the past two years. With the full integration of the two entities he has now come back to be deputy chief executive of the fund and Damian Graham now oversees all of the investments. (A lot of Grahams there, I reckon).
Kevin O’Sullivan, the chief executive of UniSuper, which has about 60-65 per cent of all its investments actively managed in-house, under John Pearce, says that the big tertiary education sector fund is a little different from other profit-for-member funds because of the profiles of its members. It manages $70 billion, which is a lot, for about 400,000 members, which is not so many.
O’Sullivan says he has witnessed a trend for a lot of the members who moved away to set up their own SMSF, say, are coming back to the fund. As well, he believes, the UniSuper advice team at UniSuper is “the best in the whole country”. A high proportion of its members make additional super contributions.
He thinks that the stand-outs from the fund’s service offering include: general administrative service; good performance (which the retirees particularly appreciate); ‘great’ advice; and, a ‘great’ annuity product on offer.
David Atkin, the chief executive of Cbus Super, is also very proud of his fund’s investment performance, which is being enhanced by an insourcing program which will see the current 15 per cent internally managed rise to around 30 per cent over the next 18 months.
But, like UniSuper, Cbus has the advantage of having a clear view of its membership base, in the construction industry. The fund owns a property development company, Cbus Property, which for a long time has helped it to deliver above-average returns.
Purists, such as asset consultants, tend to frown on pension funds investing in their members’ own industry. If the industry turns down, the fund’s performance will so, too, at a time when it may be called upon to deliver more. But, along with some other funds which invest in their own industry, such as Media Super (of which Atkin was the chief executive prior to his role at Cbus), their members tend to like it.
He says: “As you’d expect a good fund to do, we do an enormous amount of scenario testing around liquidity and other risk factors. We don’t have any concerns about working through economic cycles.”
Julie Lander, the chief executive of CareSuper, and Suzanne Branton, the fund’s CIO, say that management and staff across the fund have had a very busy past 12 months, having revised and launched the fund’s branding and advertising, prepared for and effected an administration transition, remodelled the advice offering and in the investments space, with a complete review of the Sustainable Balanced option, including an overhaul of about 50 per cent of the equities. The insurance offering has also been completely redesigned and will be released in August.
Lander says CareSuper has introduced a new advice model which provides seamless advice to members through both digital and personal channels. CareSuper’s financial planners will focus on comprehensive advice and the fund is about to launch a new service in association with a national advice firm to meet the complex advice needs of members, sometimes beyond superannuation, including other investments and estate planning.
CareSuper recently switched to Mercer as its administrator which has seen the introduction of daily unit pricing and a new member directed investment platform in conjunction with OneVue. It has also cut its fees for pension members.
Branton, as CIO, says that she believes the fund has moved to a ‘market leading’ approach with the integration of sustainable investing processes in the Sustainable Balanced option. “We’ve changed our emphasis to be on positive thematics, such as water, health care, climate and education,” she says. We prefer to engage active managers who have integrated ESG considerations rather than those who use a rules-based approach. It’s a complex area and we have surveyed our members to understand what they want – excluding fossil fuels, human rights abuses and animal testing and abuse are important to them.
Jason Murray, the head of member experience at QSuper, says the fund’s “non-peer aware” approach has stood it in good stead, as it seems to have done. Its investment portfolio also has a stronger-than-average diversification focus. QSuper, for instance, is lighter than most funds in Australian equities. It invests significant sums in long-durations bonds, too, which the wider institutional investment community tends not to. “We’ve been proven correct with that decision,” Murray says.
With its member services, and as a pioneer some years ago in developing affordable advice for its members, QSuper has substantially increased its level of telephone-based advice in the past could of years. For instance, it delivered 5,700 statements of advice last year – largely due to its voice phone service – which is about 2,500 more than the previous years, Murray says.
With its fees, which Chant West considers in assessing the ‘Super Fund of the Year’ award, QSuper, alongside several other big funds, has managed to reduce its total fee proposition to members over the past 12 months. It charges members only on funds under management, with no administration fee.
The fund doesn’t have too many inactive members, Murray says, but it has been working hard on improving its engagement and visual presentation of its offerings to members. “We’ve always believed we should own the member experience,” he says, and therefore we probably don’t outsource as much of that as some other funds may do.”
Brief profiles of five of the 10 finalists for the 2019 Chant West ‘Super Fund of the Year Award’ below:
FIRST STATE SUPER
$90 billion under management for 800,000 members. Recently announced the integration of the wealth management arm, State Plus, which was acquired from the NSW Government in 2016 for $1 billion. Currently in discussions with Vic Super about a merger, which would give the fund a bigger footprint in Victoria. The two funds are similar.
$73 billion under management for about 400,000 members. The fund has one of the highest proportions of in-house investment management – 60-65 per cent – of any of the profit-for-member funds. The trustee company is owned by Australia’s 37 public universities, who typically contribute 17 per cent in super. At least half of the membership also contribute another 7 per cent, Kevin O’Sullivan estimates.
More than $15 billion under management for about 245,000 members. Established in 1986, the year of the Wages Accord which launched ‘award super’. CareSuper has moved to daily unit pricing for its investments and a new direct investment platform with the switch to Mercer as administrator. The fund has also announced a reduction in fees for its pension products. While Julie Lander sees more changes for the industry ahead, such as more mergers, she says “being huge is not the only value proposition”.
Just ticked over the $50 billion mark for funds under management. One of the oldest industry funds, Cbus was established in 1984, when both the construction industry and political jousting in the lead-up to ‘award super’ were regularly on the front page. It proudly quotes a 34-year performance number on its website: 9.29 per cent a year, average. An unusual aspect of the fund is that it owns its own construction company, which is business development managers say the members “love”. Cbus Property has created more than 90,000 “direct” jobs.
About $102 billion in total funds under management – $82 billion in the defined contribution fund and $20 billion in the defined benefit fund. QSuper has 580,000 members. While initially a fund for Queensland State Government employees, QSuper became a public offer fund in 2017 and has “tens of thousands” of members who reside outside of Queensland. It is well known for being innovative with its investments. The fund has the rare distinction of being called before the Royal Commission to provide a “positive example” of what could be done.
We will publish the second part of this report next week, including details of the other five finalists for the major Super Fund of the Year award. The seventh annual Chant West Awards night, a black-tie affair, is to take place at the Ivy Ballroom in Sydney on May 22. The major sponsor is AIA Australia and supporting sponsor is Morningstar.