Grow Super says revelations from the Hayne royal commission, which centred on large industry and retail funds, will not translate into greater flows for the growing cohort of Millennial-focused niche funds, of which Grow is a part.
“The honest truth is I don’t see any new funds coming through that are going to fundamentally differentiate, because they don’t have the infrastructure to enforce any change,” Grow co-founder Joshua Wilson said.
“I see that as a huge challenge to a lot of new entrants because they don’t have the capability to do that, but I also see it as our opportunity and that’s where we are focusing a huge amount of our energy,” he said.
Wilson set up Grow with financial adviser Mathew Keeley and it since has gained notoriety for its app, which features Tinder-like swiping functionality. The business is part of a new breed appealing to the tech-savvy Millennial market; its peers include Zuper Super and Spaceship.
“Having an app or a digital experience is not going to generate any long-term difference to customers without [funds] being able to really dig into the supply chain of your offering and start tweaking some of those big core pieces that are going to change your ability to deliver your service,” Wilson said.
In February this year, wealth manager IOOF took a stake in Grow, and became the first incumbent to strike a deal with the raft of newer super fund players.
“Our financial adviser platform is one that we believe has huge capacity to change and improve the way in which Australians receive financial advice and that’s obviously of interest to IOOF,” Wilson said.
Fee-free for new parents
Last month, Grow also announced that it would offer fee-free super to new parents.
Wilson said the fund’s initiative, in tandem with its trustee, Diversa, is an acknowledgement that the average Australian woman will retire with just $157,000, which is generally exhausted six years after entering retirement.
“We believe taking time off work to take care of a newborn shouldn’t impact your future and retirement savings,” Wilson said.
“Fees can really affect a super balance and if you’re not working, it can really have a negative effect in the long run.”
As part of the plan, Grow members of any gender who are the primary caregiver for a child will now be entitled to fee-free super for the first six months after they give birth.
The fund’s current fees are 0.95 per cent, plus $1.65 a week for administration (excluding insurance); both of these will be waived. Rice Warner says the industry’s average fee is 1.03 per cent.
The $50 million Sydney-based fund’s move preceded the federal government’s rejection last week of key recommendations in the 2016 Senate Economics References Committee report called A Husband is Not a Retirement Plan: Achieving economic security for women in retirement.
The report made 19 recommendations, including paying super to those on paid parental leave and legislating for the Commonwealth Paid Parental Leave Scheme to be increased from 18 to 26 weeks. The government noted these but did not agree to them in its response to the report released on August 16 this year.
The government also rejected the report’s proposal to raise the superannuation guarantee to 12 per cent, from the current 9 per cent.
“Starting in 2021, the SG rate is legislated to gradually increase to 12 per cent by July 2025,” the government’s response read.
“Individuals who want to save more for their retirement can still do so.”
The government did agree, in part, to a recommendation that the Sex Discrimination Act 1984be amended to ensure companies are able to make higher superannuation payments for their employees should they wish to do so.
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said it was “disappointing” the government had taken two years to respond to the report.
A 2017 Australian Services Union/Per Capita Report found that women retire with 47 per cent less super than men and that homelessness among women was a growing issue.
Grow pays the full SG for 12 months, for its employees on parental leave. Wilson is now urging other large funds, many of whom have been tarnished by the damning information heard at the Hayne royal commission, to follow suit.
“There is a huge amount of room for improvement in the sector and, ultimately, I think this is a clear mandate for everyone in the ecosystem to act always in the best interests of members,” he said.