Is retail versus industry still relevant in a MySuper world?

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The traditional war between retail and industry funds is probably no longer relevant, says the general manager of retirement and advocacy at Colonial First State.

Nicolette Rubinsztein explored the theme at the Actuaries Institute financial services forum last week, and she dispelled many of the common myths.

She said traditional competitive drivers have now been commoditised and fall into three categories – performance, fees, and insurance premiums.

In terms of performance, Rubinsztein introduced statistics that show retail funds have outperformed over five years; however industry funds slightly outperform over a ten year period by 0.5%.

There is a single main contributor to this, which is the high allocation to listed property and infrastructure within industry funds, she said.

And contrary to findings of a recent research report by the Grattan Institute which shows industry-fund fees as being much lower, Rubinsztein displayed statistic by Tria that show that on average, new retail fund are on average 10% cheaper than industry funds.
These costs have been on a steep decline since 2012, while industry fund fees have increased slightly.

Currently, there is virtually no difference in insurance premiums between the two sectors.
There are also new differentiators when it comes to a comparison of retail and industry funds, which include brand, product structure, advice/service and governance.

Rubinsztein said there are strong brands across both sectors, however retail comes out slightly stronger, with a 31% proportion of people who would choose it as a financial service provider as opposed to 27% who would choose the industry super sector.

This was according to a 2013 study done by Investment Trends, which asked: “suppose there was nothing to stop you from choosing any financial service provider for superannuation, which one would be your first choice?”

Perhaps not surprisingly, retail funds have many more types of investment options, with the average fund offering 283 options, as opposed to the industry 11.

Rubinsztein said in terms of advice and service, the retail sector has a higher number of advisers and platforms that deliver an array of services, including tailored reporting, online transactions and adviser fee flexibility.

However, when it comes to telephone advice, industry funds are generating a larger number of SOAs per adviser.

Finally, Rubinsztein said that the retail versus industry debate is not relevant in a MySuper realm because the industry now compares funds and not sectors.

And in terms of member satisfaction of these funds, while the top end is closely contested, overall industry and public sector funds are stronger on average.

Rubinsztein concluded that because of the changing landscape of MySuper, it’s no longer possible to directly compare the sectors.

Instead, new differentiators such as satisfaction, branding and products are only comparative on a fund-by-fund basis.