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I was pleased to be a panellist recently as part of FundTECH2017, a superfund technology, innovation and disruption forum in Melbourne. We explored how fintech start-ups are partnering with superfunds and SMSFs to build greater efficiencies and optimise member outcomes.
Superfunds are clearly beginning to understand that they need to become more client-centric to attract, retain and engage with new and current members. The emergence of start-up superfunds aimed at millennials and other niche markets, as well as the rapid growth of the SMSF industry, has dramatically increased the pressure on superfunds to evolve or risk being left behind.
While there have been a few cases where some forward-thinking industry funds have invested in innovation to lift their game, on balance it seems that most superfunds are in "reactive with good intentions" mode versus "proactive with bold initiatives" mode, which is unlikely to plug their slow leakage of members to SMSFs.
There was, to my mind, a disproportionate amount of time spent considering how to improve engagement with members and not enough time spent on lowering costs, improving investment results and transparency. Engagement is very important, but these other issues are critical causes for dissatisfaction among members, who then turn to SMSFs and the likes of Six Park to better manage their pension investments.
Well-constructed fintech start-ups offer superfunds the opportunity to pursue partnerships and alignments that will help them navigate the inevitable structural reform that consumers are demanding. And, while gaining scale can be a big challenge for fintechs, it also leads to lean, agile and dynamic business models. This is in pretty clear contrast to larger companies, many of which seem unable or unwilling to truly embrace change and invest in the kind of technological innovation that will reduce costs and improve transparency.
So what does all this mean for the most important person – you, the client? What can you do to make sure you’re getting the best deal, and how do you make sure you’re with the best provider for your situation?
Be proactive: Think about your super the way you would think about a home loan – do your research (investment returns, insurance coverage and costs, etc.), shop around, and learn exactly what your superfund is doing (or not).
Look for low fees: Generally, industry funds are less expensive and have more robust product offerings than retail funds so, at the very least, do yourself a favour and take an hour to review your fund's performance and fees. Superratings is a great starting point for independent research on who’s doing well. If a switch will save you money and boost performance, then do it – it’ll make a huge difference down the road. Click here to read more about why it pays to keep costs low.
SMSF: If you have decided that an SMSF is suitable for your needs, don't believe all you read about needing $500k+ to run a viable SMSF. There are innovative, smart, low-cost services out there now that can make SMSFs more accessible than ever.