Finding the floor for fees

Industry funds are close to their floor on administration fees, while retail funds still have some room to move, which will give retail players an advantage in the hyper-competitive world of superannuation and wealth management, according to Ben Facer, principal at Deloitte.

Facer, who was one of the authors of Deloitte’s sixth biennial report, The Dynamics of the Australian Superannuation System 2013-2033, said the gap between industry and retail superannuation fees had narrowed with the introduction of the Future of Financial Advice and Stronger Super reforms, making retail master trusts more competitive.

He said retail funds would benefit from the recent ban on commissions and other forms of conflicted remuneration, citing the report’s estimate the retail super market will hit $2.5 trillion by 2033.

The Deloitte report, released on September 23, was co-authored by superannuation leader Russell Mason and Diane Somerville.

“The retail distribution networks of the banks with their branches will just continue to drive growth,” he said, pointing to the low-cost direct-to-consumer super products offered by the likes of Westpac, Commonwealth Bank of Australia, ANZ and Yellow Brick Road.

He also said that corporate super master trusts offered by groups such as Mercer, Plum, Russell and AMP would continue to grow.

“There’s a huge focus on fees among both the industry and retail funds, but there has to be a floor and we don’t know where that floor will be,” he said.

“Industry funds have been driving fees down through operational efficiencies and by bringing some investment functions in house and, I suspect, some are getting close to their floor in terms of operational costs, although there could be a way to go with investment costs.”

Facer said retail funds were experimenting with new and innovative ways of remunerating advisers given they could no longer receive commissions and volume rebates.