Publications

The changes announced in the recent Budget, aimed at improving efficiency in the super system, are in essence picking the ‘winners’ and the ‘losers’ in the system. The stapling of accounts and spotlight on fees and performance is likely to escalate switching behaviour while reducing the prominence of the default distribution market, which may shrink to less than 220,000 accounts annually. The battle ground for member acquisition will shift to ‘direct to consumer’ distribution, a market which is estimated to be approximately 1 million accounts annually, currently dominated by a handful of large funds.

Account consolidation and legislative changes are placing pressure on funds’ fee models, putting their business models at risk.
At a system level, funds are experiencing an increasing gap between total expenses and total fees due to a decline in total member accounts. In the past five years, total expenses grew by 6% CAGR, while the total number of member accounts declined by 2% CAGR, total revenues declined by 1% CAGR. This issue is likely to be exacerbated by a fundamentally more expensive business model required to meet members, regulators and other stakeholders’ expectations and to compete with more aggressive rivals.