For many superannuation funds with less than $2 billion in funds under management, now is the time to make a decision about their future – and there aren’t many attractive options, says Rice Warner.
In an article titled 'Superannuation Funds at the Crossroads', Rice Warner chief executive Michael Rice said funds with under 100,000 members and less than $2 billion in FUM should review their business plans.
Specifically, smaller funds should consider whether the plan they put into place four years ago (with the introduction of MySuper) is "on track".
If it is not, funds have a number of options, Mr Rice said – the first of which is to "give up and transfer members and assets into a large fund" (which "few trustees and executives like", for obvious reasons).
"Another [option] is to seek a fund of a similar size and culture and to merge with them. That provides some inorganic growth, buys some time and broadens the range of future options," Mr Rice said.
Alternatively, smaller funds can review their objectives and simplify their structure, he said – something that might make the fund look less competitive (even if it is more "focused").
"Another option is to transfer into a big fund but maintain the identity and brand. Few like this option as it means giving up trusteeship, but many corporate funds have done this over the last 20 years and their employees have benefited from the change," Mr Rice said.
"Finally, there is always the option of continuing with a stronger focus on organic growth. This is valid but it may not be achievable for all. Success will require building a competitive advantage in selected niches, focusing on a few core activities, and leveraging off the scale of well-chosen service providers and partners."
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