by Greg Bright
The past 12 months have been fabulous for profit-for-member funds. Difficult in many respects, but, overall, fabulous. Inflows soared off the lead-up to, and the duration of, the Royal Commission into Banking. And member engagement has increased. Avoiding complacency is now the new challenge.
As Ian Silk, the chief executive of AustralianSuper, said in his keynote address to the CMSF conference in March, “there is no cause for triumphalism”, “There is no basis for complacency or hubris whatsoever,” he said. “The fact that industry funds emerged largely unscathed from the Royal Commission is no cause for triumphalism… Our challenge is fundamental: to be the best we can be for our members.”
Emphasising the Royal Commission bounty for profit-for-member funds, a spokesperson for AustralianSuper says the fund had inflows of more than $11 billion so far this year. It expects inflows to total about $15-16 billion for the financial year, which will be an 80 per cent increase on last year. Most of the money, the fund believes, is coming from members who were previously with AMP or other commercial funds operated by the banks.
This report at Investor Strategy News is the second part in a two-part series which looks at the 10 finalists in the Chant West ‘Super Fund of the Year’ award. The finalists are all profit-for-member funds this year, as was the case last year. The black-tie awards night, covering 12 separate awards, is being held at the Ivy Ballroom in Sydney on May 22. The event sold out a couple of weeks ago. The first part of this article was published last week, on May 13. The 10 finalists, in no particular order, are: First State Super, UniSuper, Cbus, CARE, QSuper, HostPlus, REST Super, Sunsuper, HESTA and AustralianSuper.
Paul Watson, the group executive, member experience, at Hostplus, says the increase in membership and engagement is coming from all channels. The personal division (members engaged directly rather than through an employer) has seen “extraordinary growth” he says.
Probably like REST Super, the industry fund for retailers and staff, Hostplus gets a big chunk of the 500,000-odd newbies to superannuation each year. Watson thinks maybe 25 per cent come to Hostplus. This presents an interesting challenge. They are mainly young people, Watson says, who are not really up for a conversation on their superannuation.
The numbers, a lot of them recently driven by the Royal Commission, are interesting. Hostplus not only had a big increase in funds under management, to $41.5 billion as at March this year, it also had a big increase in membership and employer sponsors.
Similarly, at HESTA, which is one of the two ‘top 10’ among Chant West finalists which ticked over the $50 billion mark for funds under management in the last few weeks, the relationship with new members – and better engagement with existing members – has taken on a new shine for the fund. The other of the top 10 to recently hit the $50 billion mark is Cbus.
HESTA, whose 880,000 membership, primarily working in health and community services, is more than 80 per cent female. The fund has always had a strong membership alignment, encouraging diversity, with the majority of its board and senior management women.
Its soon-to-retire investment executive, Rob Fowler, was one of the pioneers of Australia’s promotion of ESG strategies. And its current CIO, Sonya Sawtell-Rickson, is well known in promoting good governance principles for both funds and their investee companies. HESTA was the first major super fund, we think, to introduce a socially responsible investment (SRI) option for members in 2000. Since then, it has become very sophisticated in its integration of ESG principles throughout its portfolios.
Lisa Samuels, HESTA’s executive, marketing and people, says that the fund has been focused on having a deeper understanding of member data, which all employees have access to. “Everything we do is aimed at trying to improve the members’ wellbeing,” she says. “Engagement has increased more than 10 per cent over the past 12 months and we are seeing an improvement in the level of action. There’s been a fundamental change… We’ve done a lot of work in bringing all the data together and how we use it.” HESTA works closely on these matter with its administrator, Link Group, but also gets information from a variety of other sources.
“We think that we can have a competitive advantage because of our long history of a deep commitment to the members we serve,” Samuels says. “Instead of thinking about education and advice, say,” she says, “we think about it in terms of what the members want. They just want help. They don’t think about things as we do in the financial services industry.”
Hostplus’s Paul Watson says that the demographic issue for older members – not that Hostplus has so many of those – is important in setting them up for solid retirement streams. One of the interesting things the fund has been doing “quietly” is offering some of its member investment choices to the SMSF market. As a big industry fund, those choices, including some otherwise illiquid assets, are both high performing and cheap. Hostplus is actually at the forefront of this sort of offering to win back older and higher-account balance members who are considering an SMSF because their accountant is leaning on them to do so. Under its recent pilot scheme, it has secured 46 SMSF clients. Given their average account balance, this is a lot. Hostplus will launch the SMSF program, officially, at the end of this month. You heard it here first!
Similarly, REST Super has been undergoing a significant transformation in recent years, with an emphasis on member experience. “We’ve been investing in digital customer experience technology to help our members engage with their superannuation on their own terms,” says Vicki Doyle, the fund’s chief executive. “We all acknowledge that engagement has been a perennial problem for the industry. We strongly believe technology is the answer. People are accustomed to accessing their financial services via technology, like apps and online platforms. It’s increasingly becoming a customer expectation.”
Doyle says: “If we can get members to interact with their superannuation earlier and more frequently in ways they are accustomed to, they will have greater opportunities take control of their retirement savings.
“Some of the highlights of our customer service innovations include:
- The REST App has been downloaded more than 220,000 times. More than 20 per cent of the registered App members are aged between 30-39. In 2018, we facilitated more than 1,000 in-app chats per week from our members.
- Our online Live Chat service facilitated around 4,000 inquiries per week in 2018, as has a customer satisfaction rating of 96 per cent.
- Our Virtual Agent ‘Roger’ answered nearly 400,000 questions in 2018 and a total of 900,000 questions since it was launched in 2017. ‘Roger’ can also field questions via Google Home.
- The REST Advice team also provided more than 3000 digital Statements of Advice to members.”
Doyle believes that it is imperative that big profit-for-member funds develop smarter ways to communicate and connect with members. “We have a great opportunity to demystify superannuation and insurance for every Australian, so they can progress through their lives with greater confidence in their financial future,” she says.
Brief summary profiles of the “other five” finalists in the Chant West ‘Fund of the Year’ award are:
Founded by the AHA (Australian Hotels Association) and what is now known as the ‘United Voice’, which is the hospitality industry union, in 1988. The fund has more than one million members and has lifted funds under management by 35 per cent to $41.4 billion in the past 12 months.
There are currently about 1.2 million members. Many of those members are our children. That number has grown 12 per cent on the past 12 months and the number of contributing employers – a lot of them little cafes and restaurants – has increased by 20 per cent to 180,000 in the past year.
Hostplus lays claim to the title of ‘number one’ fund for investment performance last year. It’s 12.5 per cent return for its default fund was certainly number one on several charts. And its longer-term performance has also been strong. But the thing is: profit-for-member funds should not try to differentiate themselves on performance. Each performance number of solid-to-good over the long term. It’s a given.
One of the two funds in the top-10 list up for ‘Super Fund of the Year’ award, by Chant West, which ticked over the $50 billion mark for funds under management within the last couple of months. The other to make the $50 billion milestone was Cbus. HESTA has 880,000 members in the health and community services fields.
The fund has been a pioneer in the ESG space, and this has not only satisfied its members’ wishes, it has also added to returns for all members in recent years. HESTA was not only possibly the first industry fund to introduce an “ethical” investment option, it was also one of the first to integrate ESG principles across its portfolios.
Australia’s largest super fund, with about $145 billion in assets, and a bellwether for all other funds. The fact that it is a bellwether – i.e. a leader – is important. Aussie Super is a big and difficult thing to handle, we suspect. It’s kind of like: ‘so far so good’. Let’s see how the next few years pan out.
Not to take anything away from Aussie Super: It has been an incredibly innovative fund despite its size. But, what has it become? Like REST, it has just over two million members. In the wake of the Royal Commission, it has become a sort-of default fund for everyone. When did that happen and what does that mean for the broader membership?
This Queensland-based multi-industry fund has grown exponentially into the southern states, which, dare we say it, are far bigger than its Queensland universe. In the past year or so it has absorbed several southern funds as “merger” partners. Partly this is because of the benefits of its bespoke admin system.
Sunsuper has about $64 billion under management. It’s possibly the fastest-growing fund in Australia, and, helped by its in-house administration system, is considered a good home for smaller funds to merge with. Its high-grade in-house admin system was acquired from SunGard, which had previously been an outsource provider. Starting not long after the start of industry super in 1986, the fund, over time, became a national voice and provider.
It used to be that the biggest bill at REST was its postal bill. The fund’s challenges, with more than two million members, include a low-account balance average in its membership (everyone has a kid who has a REST account) and an increasingly low-cost environment. Notwithstanding, REST has been able to produce a high long-term default investment return, with the help from its asset consultant JANA.
REST was possibly the first super fund to insource its investments, starting with fixed income, and had took the interesting philosophical position to park that internal/external capability in a separate company based in Melbourne.
Meanwhile, REST swill likely struggle with the forced transfer of assets below $6,000 to the ATO from this July, whereby many of those low-balance ‘members’ will be forced to leave the fund.
Note: the Awards night has sold out, but the organisers say that there were a few ‘singles’ seats available as of last Friday. Info: