One not-for-profit super fund is actively seeking to improve its relationships with financial planners, as Simon Hoyle reports
To say there is a level of mistrust between industry, or not-for-profit, super funds and the financial planning community might be regarded as an understatement.
To financial planners, industry funds are clearly and unambiguously anti-advice (when in fact, industry funds are really only anti-commission).
And to industry funds, financial planners are only interested in churning members into expensive, commission-paying retail super funds (when, in fact, planners are only trying to find the most suitable funds for clients).
But First State Super, the $18 billion, 530,000-member fund that started out as a NSW public sector super fund, is trying to tread a different path.
The fund wants to know if there’s a way it can effectively and efficiently interact with financial planners broadly, without reinforcing the prejudices and misconceptions that have plagued the industry fund/financial planner relationship for years.
First State Super’s chief executive, Michael Dwyer, has already overseen the establishment of a fee-for-service, in-house financial planning division: FSS Financial Planning.
In the 18 months or so that the service has been running properly, several thousand First State Super members have availed themselves of one or more of the three tiers of advice the fund provides.
The lowest tier is very simple, limited advice, generally delivered over the phone, costing $75. The second tier is the provision of transition to retirement (TTR) advice, for $450. And the third tier is a full-service, comprehensive financial planning service, costing $2000. (And if a member wants ongoing advice, with regular reviews and so on, the fee is $1200 a year.)
In each case, members can pay for the advice from their super fund – provided the advice is “largely focused on superannuation” – or from other sources, if they prefer.
Understanding how financial planning works for First State Super members, Dwyer is confident he can get over the barrier that has traditionally existed between not-for-profit funds and the broad planning community.
“In terms of going forward and understanding the community we’re becoming a part of, media reports often say that planners don’t recommend not-for-profits or industry funds,” Dwyer says. “We’d like to understand that a little more.
“We believe we’ve got a fund that would be very attractive to a large proportion of the working population: Low cost; good returns; significant choice; we’ve been around for a long time; we’re solid, safe and secure; we’re a liquid fund, we have enormous allocations to liquid investments; and we came through the GFC very well. We have a philosophy of protecting members on the downside and giving them competitive, but not shoot-the-lights-out, performance on the upside, because that’s not our game. And we’re the lowest-cost fund in the country.
“So with all of that, we’d be fascinated to find out…would [planners] like to recommend a product like ours to their clients?
“Once we…understand what drives their business, and whether a not-for-profit like ours is interesting to them; once we have that information and perhaps a dialogue, we can better understand if there’s any options and avenues we can go down to make our product available to them.
“If a group of accountants or planners wanted to know more about what we do, we’d be only too happy to provide that information, either electronically…or in written form.
“We’re talking to a community of people who have, perhaps, the same drive as us, which is acting in the best interests of their clients. But of course, professionally, the only way they could recommend us is if they have a full knowledge and understanding and have conducted some research about us and know what this fund stands for.”
Dwyer says that traditionally, funds like First State Super simply have not interacted with financial planners, nor with the organisations and individuals responsible for defining and maintaining dealer group approved product lists (APLs).
But with 530,000 members, there’s a good chance that some members already have a relationship with financial planners, in some shape or form.
“We believe that [fund] members, community members and working people are best served by being a member of a fund like ours, for a whole range of reasons,” Dwyer says.
“There are key influencers out there, professional people who are financial planners or accountants or others, and the more they know about us the better.