Super’s new model: managers offer cheaper products for independent investors

As active managers struggle, a string of developments promise a cheaper way to manage superannuation for independent investors.

Some fund managers are now offering a discounted super fund structure.

With the highly publicised woes of Magellan leading to billions of dollars in investor money walking out the door, it is not surprising that other fund managers are doing everything they can to protect their own fund flows.

One of the more interesting ways we have seen in recent times has been for fund managers to not only invest your money, but to also offer you a discounted super fund structure to invest through.

Contrarian fund manager Allan Gray is one such manager to have launched its own super fund. Although a household name in South Africa, its country of origin, Allan Gray is lesser known in Australia, where it has operated for ­almost 20 years.

In 2018, it took the plunge and opened the doors to the Allan Gray Super Fund. Deborah Barr, head of product at Allan Gray, says: “Our long-term investment approach aligns naturally with superannuation, so we wanted to enable our clients to invest in Allan Gray managed funds directly in retail superannuation at the lowest possible administration price in the market. The result is our own superannuation fund, which offers our managed funds to investors for their superannuation savings, as well as offering a broad choice of other managed funds and securities.”

If you roll over your super to Allan Gray, surprisingly you are not pigeonholed with a narrow range of in-house investment options. There are more than 350 managed funds to choose from in addition to term deposits, ASX listed securities, ETFs and LICs. On average, only 15 per cent of members’ money is invested in Allan Gray funds. The conclusion is that members are happy with a core holding in Allan Gray, but also use the non-Allan Gray options to build a diversified super portfolio.

If Allan Gray has offered the prototype in the local market, the product many advisers are waiting for is an ambitious plan from Vanguard, one of the world’s largest index fund managers. Vanguard is also planning to launch a retail super fund. Although details have not been released, if it is similar to the already active Vanguard personal investor account, there is likely to be a limited range of Vanguard managed funds and ETFs offered with no administration fee.

Financial advisers have also been active in super funds, trying to find products that are both low-cost and enjoy a range of investment options. While it is hard to keep up with all the new releases, a few have risen to the surface.

Super Simplifier, built by software and services firm WealthO2, has almost 6000 members and holds the coveted crown of being the fastest super platform to reach $1bn worth of funds.

WealthO2 chief executive Andrew Whelan says: “The advisers who heavily use WealthO2 say that it provides scale and efficiency to their financial advice practice. We consider ourselves a fourth-generation platform, which means we place the needs of the investor at the centre of our innovation. Historically, super platforms have been a tool to distribute institutional products, with investor and adviser needs often coming a distant second.

“We are weeks away from launching a client portal where the whole client portfolio, including loans, investment portfolios and other off-platform assets, can be seen and tracked against the client’s goals. This will be a first of its kind in the market.”

It’s becoming clear investors have more choice than ever before with a flurry of new super funds coming to market offering innovation and cost savings. We have fund managers coming into the market with their own branded super funds to entice investors to use their in-house investments.

We also have super funds being released to partner with financial advisers so that they can provide a streamlined relationship with their clients, using the super account as more than just a place to monitor retirement savings, but to serve a purpose as an overall financial hub to keep track of the household’s overall financial health, investments, debts and goals.

The pressure will now fall back to the major retail and industry super funds to stay relevant in the face of rising competition, both in terms of price and features.

So if you have not reviewed your super account for a few years, given the significant changes and new entrants, it should be high on your financial “to do” list in 2022.

James Gerrard is principal and director of Sydney planning firm financialadvisor.com.au

Originally published as Super’s new model: managers offer cheaper products for independent investors