Instos snare retirees using 'substantial distribution force'
The big banks with their large planner armies are snaring swathes of retirees, leaving industry funds, with their comparatively smaller adviser numbers, on the back foot, says Tria Investment Partners.
In a white paper, superannuation industry consultant Tria Investment Partners said there is a strong correlation between the scale of a super fund's salaried and aligned planner force and the size of its pension division.
"Retail [super funds] with their substantial distribution forces all have more than 20 per cent of their assets in pension mode," said Tria.
For example, AMP has 3,260 advisers and 26 per cent of its superannuation assets in pension mode, whereas industry fund Sunsuper only has 25 advisers and 6 per cent of its assets in pension mode.
"In fact, there is already evidence that funds with the largest networks of advisers are attracting the largest number of retirees – and those with underweight advice networks are struggling to retain members at the critical point of retirement," said the consultant.
The lack of "adequate advice provisions" requires an urgent response from the not-for-profit funds, said Tria.
"Many not-for-profit funds are facing a very large advice capability gap indeed," Tria said.
The top five industry funds have 36,810 members per adviser, while the wealth management arms of the big banks (and AMP) have closer to 1,000 members per adviser.
"While this ignores supportive IFA networks, it does give a sense of the advice gap between industry and retail funds," said Tria.
"Many industry funds are already being seriously challenged by their members' demand for advice. For many not-for-profit funds urgent action is needed to develop a practical and effective advice strategy," said the consultant.
Despite this, industry funds are continuing to win market share from retail funds, with retail funds steadily declining by 6 per cent over the past 10 years while industry funds have gained just over 5 per cent, according to the 2014 Tria Super Funds Review.
"It's clear that industry funds continue to perform well in workplace super and any issues attracting and retaining retirees are yet to cause a problem for market share of the sector as a whole," said Tria.
"However, with the forces we've outlined above, without any type of response it's only a matter of time before we start to see a significant shift in the competitive landscape.
"The advice capability arms race, in all its forms, will be one of the most interesting contests in the super industry over the next few years," said Tria.
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