No, this is not an article about Storm Financial; that scandal has already had plenty of media. Professional Planner magazine recently passed on to me a comment from one of its readers querying how corporate sponsorship of Melbourne Storm – presumably by HOSTPLUS (and more recently Members Equity Bank, of which I am a Director) – can fit with the industry fund slogan “all profits to members”.
The planner in question seemed particularly concerned that the principals of these organisations might enjoy free tickets or other corporate entertainment not generally available to fund members. If they do, I am sure they would be rubbing shoulders with lots of other financial services industry executives. I am strictly an Aussie Rules man myself.
The question does, however, raise the issue of continuing with expensive advertising and branding campaigns even in very difficult times for member returns. Basically I see this as a burden made necessary by the incredibly strong impact of economies of scale in superannuation administration, funds management and group insurance. Unit costs per member benefit dramatically, other things being equal, by growing/defending membership numbers and funds under management. Scale is just one factor in industry super fund outperformance, but it is an extremely important one.
So, given that competition in the super industry is driven to a large degree by capturing advisory groups through the payment of sales commissions and other soft dollar benefits, and given that industry funds have eschewed that course of action based on an analysis of the relative cost to members’ long-term retirement savings, the funds must continually be searching for other means of getting their story across.
A large number of industry funds have chosen to collectively co-ordinate their key message through the “Compare the Pair” and “Bernie Fraser” commercials to maximise the value of their spend. Additional strategies to build branding are also likely to be a continuing and perhaps growing feature of the industry, so long as economies of scale persist. And so long as performance is measured on a true after-fees basis, that is on the basis of the “net benefit to members” – the amount that actually ends up in the member’s account – then everyone can ultimately see who is achieving the best (and worst) results for members.
Go Storm.
