CoreData head of advice, wealth and super, Salvador Saiz, said the bulk of switching between funds by members has actually benefited industry funds as a segment, and that will continue to be the case going forward.
“Of those looking to switch going forward, about four in 10 (42.2 per cent) are likely to move to an industry fund,” Mr Saiz said.
“This is followed by almost one quarter that will move to an SMSF. At a fund level, those funds mostly likely to benefit from switching members are AustralianSuper, AMP, MLC, HESTA and Colonial First State, respectively.”
In terms of leakage to SMSFs, retail funds have lost the largest proportion of members to this segment. “In particular, those that through our behavioural segmentation are defined as controllers and outsourcer SMSF trustees are more likely to have come from retail funds than from other sectors,” Mr Saiz said.
Fees and returns are the main drivers of fund switching, each cited by around two thirds of the 1,585 respondents to CoreData’s Member Retention Report as key features a fund would need to focus on to retain members.
There has been a focus on introducing direct investment options (DIOs) among large funds to combat the greater choice and control offered by SMSFs, but CoreData found that while DIOs are desirable for members, they are relatively ineffective in terms of member retention.
Just over half of respondents said they are likely to use DIOs, but access to direct shares and term deposits doesn’t rate highly as a retention tool, CoreData found.
“However, in the battle to combat the leakage to SMSFs, the study does indicate that DIOs could be key, with more than half of those likely to establish or set up an SMSF indicating they would reconsider such a decision if their fund offered a DIO,” Mr Saiz said.
Funds are already looking beyond DIOs in the quest for member retention, offering services such as mortgage broking and partnering with specialist SMSF providers, CoreData found.
Financial advice was also found to be a large drawcard for funds, outlined as a key factor for almost half (44.5 per cent) of those likely to switch funds. A large proportion of members, however, aren’t aware that their fund offers advice, CoreData found.
“There is no doubt that advice is a key factor in member engagement, with previous research indicating not only that members would like to access advice (in one form or another) through their super fund, but that it is a key retention tool,” Mr Saiz said.
