Posts Tagged ‘noslider’

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.

In November we shared with you insights on remaining relevant in the new super distribution landscape. Our analysis showed that an increase in switching activity was largely benefiting two industry funds, who have seen record cash inflows mostly at the expense of the retail funds that came under intense scrutiny during the Royal Commission. Since then new APRA data shows that these two funds continue to win the vast majority of ‘switching FUM’ as demonstrated by net roll-ins excluding successor funds transfers (SFTs).

As the end of the year approaches, most executives are starting to turn their minds to the strategy and business planning process for FY2021. This year, APRA’s new regulations, which are set to commence on 1 January 2020, are expected to change the way many funds approach strategic and business planning. This article outlines how you can strengthen your strategy and planning process and key strategic artefacts to better align with best practice, SPS 515 requirements and stakeholder expectations.

In past decades, wholesale distribution channels – the industrial machinery – have been the key enabler of member account growth in industry super, while retail funds relied heavily on marketing through their advisor channels. However, in recent years, consumer choice coupled with policy changes place pressure on wholesale distribution channels. The challenge for many funds is to rapidly develop a more agile, direct-to-consumer distribution model that will allow them to remain relevant and succeed in this new environment.

Over the past 12 months, and with no signs of slowing down, APRA has been prescribing guidelines relating to the processes we work on every day at Right Lane: strategic and business planning, outcomes assessment and measurement, and group and individual accountability. While some funds may consider this overly prescriptive regulatory overreach, we believe the gist of the regulations is not unreasonable.