Bank-triggered switching 'good' for consumer

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Banks are increasingly poaching clients from other super funds by contacting consumers and offering lower-cost products, but an industry expert says this is not necessarily a bad thing.

Fund members are switching to lower-cost super products after being contacted by bank tellers or bank-aligned advisers, the Core Data member growth report for 2013 shows – gathered from the responses of 1008 super fund members.

Bank-employed advisers are the main trigger for this switching, which Core Data said in notes accompanying the research is of “particular concern” to other super funds, particularly to not-for-profit funds.

The research reveals one in five members appreciate bank-employed advisers contacting them to discuss super options. Respondents on average said they would need a discount of about 31% before seriously considering switching funds.

Association of Superannuation Funds Australia CEO Pauline Vamos told Wealth Professional that bank-triggered switching is not a bad thing for consumers, because the increased competition keeps product prices down.

“Does it mean greater competition for the industry? Yes. But it also means greater benefits for the consumers who are being offered lower cost products. That’s a good thing for consumers.

“People are already switching between super funds. Many members have been consolidating accounts because it’s much easier to do it these days. People have gone down from four accounts to two accounts, on average.”

This happened over the past 12 months and is due to the Australian Tax Office offering a tool to find all super accounts in one place, she said.

The research showed there is no clear banking leader for selling super when respondents are split by their individual banking provider – but when gauged for their interest in being sold super by their bank teller, St George Bank leads, while Bendigo Bank customers prefer contact from a financial planner.

Core Data said: “Banks’ efforts at selling super over the counter will be the next challenge for industry funds, as banks look to leverage from their face to face engagement with customers, by training bank tellers to sell low cost super products.”

If a teller was to advise a person to switch funds then that would be provision of advice, and a teller cannot do that unless fully licensed, Vamos said.

But what banks are doing is using the teller like a referral agent, and then pushing the customer to see a bank-aligned or independent adviser to talk about switching funds.

“The banks are just using avenues to soft market their products, and anyone in their situation would do that. The report is reflecting what’s been happening for some time,” Vamos said.
However, overall members trust their existing super funds and want them to have a higher profile, the Core Data research showed.

Around 70% of members believe the superannuation industry should raise its profile and one in six say super funds should play a leading role in discussing investment and market issues on the news and other television programmes.

“Members understand the significant influence of the sector and funds on financial markets and the economy, so it’s not surprising to see that members would want funds to take the lead publicly. For one, it would give funds a more transparent profile and allow members to put a face to funds and would give funds a profile beyond that seen in advertisements and sponsorship,” Core Data commented.

But Vamos said this push for a higher profile and interaction with the public is already happening, which is good.

“I absolutely agree with this. Our role as the collective industry body is being the collective voice for the community. Now, we’re having that conversation with the community. That discussion is starting to happen.”

“What this data reflects is we have a changing society. Ten years ago nobody could be bothered with all this. We’ve had a societal shift… now it’s fully more about the public good.” 

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  • Tash on 16/01/2014 9:58:48 AM

    "..offered lower cost products. That’s a good thing for consumers." So that's what I've been doing wrong all these years, buying more expensive quality product, which I value, which gives me the satisfaction I am seeking, with good conversation, with the options and choices I want, using my money. I suppose I should be content with a cheaper, basic level offering. At least then I could more easily disengage and be happy in my blissful ignorance. Sorry. Not having a fun day today, needed to vent.

  • JM on 16/01/2014 10:00:43 AM

    So.... lower fees means a better super product???
    That is all that is needed on the SOA? if there is an SOA of course..
    Why is this not considered 'churning'??
    How do the Banks get away with murder?

  • Alistair on 16/01/2014 2:39:42 PM

    Needless to say, banks will be suggesting THEIR low cost alternative only. No other options would be discussed. Is this good for the consumer ? No. The consumer needs to be more informed not less.
    An empowered client is not one that is fee cautious and value ignorant. FOFA is designed to ensure that clients are and will always remain ignorant.
    If government were serious then we would have had the complete separation of product manufacturer from adviser.
    This ensures an informed and empowered client is the outcome along with professionalism for dedicated advisers.
    The previous pack of nitwits in Labor did not want this to occur.
    Are we really surprised that banks and the ISN along with large life offices are doing this.
    No.
    Clients will have to face the fallout of ignorance promoted by inept legislation that is FOFA with sub standard retirement outcomes and government or rather the taxpayer will continue picking up the bill....as always in this country...the blind continues to lead the blind......straight into the abyss.

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