Feedback from financial planners and licensees was a major factor behind Aware Super’s rollout of new “low-cost indexed options” last month.
The $150 billion industry fund in July announced four new indexed options, which it claimed had “thrown down the gauntlet to other players” offering passively managed and lower-cost choice products to members.
Aware Super group executive for member growth Steve Travis says advisers’ regulatory compliance considerations, especially FOFA’s duty to act in the best interests of clients, had “100 per cent” factored into the fund’s decision to bring the new suite to market.
“The adviser appetite for index options was probably stronger than it was from members themselves,” Travis tells Professional Planner.
“There is a cohort of members who want that control, but it was much stronger messaging from advisers that they really liked index options. They are a far more sophisticated group [than members] and understand investments. They want to be able to choose a portfolio that had index in it.”
The suite which was quietly made available to members in May contained two options aimed at members in accumulation and two for members in pension phase. Aware has tapped global giant State Street Global Advisors to provide the underlying indexes, allowing it to charge members in its high-growth index option a total fee of 9 basis points, or 0.09 per cent, which it said was competitive against other super index options.
Cost is widely believed to be a key – but not the only – factor regulators or the courts would consider when assessing whether a financial product recommendation made by an adviser met the best interests duty.
But in addition to the index options, Aware this week launched a term deposit option, allowing superannuants to invest directly in the investment product taking advantage of concessional tax settings in the super system.
Aware members can invest a portion of their super directly in term deposits for three, six, nine or
12 months at rates currently ranging from 4.85-5.25 per cent p.a.
Embracing external advisers
More broadly, Travis says engagement with external advisers is an “important part” of Aware’s overall growth strategy. “We’ve been building relationships with a number of advisers and dealerships, and increasing that footprint across the country,” he says. “And part of that was to understand the market needs and build product and service offerings for it.”
He says Aware is putting the “finishing touches” on a new portal for independent financial advisers, following a similar move by outsourced advice and admin provider Link, first reported by Professional Planner last week.
The move comes as regulators ASIC and APRA have implored super trustees to do a better job of working collaboratively with external advisers.
While most funds are offering some form of comprehensive or general advice to members, too few are identifying where members have a pre-existing advice arrangement in place, a joint review of retirement income strategies by funds found.
The outreach also follows what were arguably a series of financial advice missteps by Aware Super and one of its legacy funds, the NSW public service-focused First State Super. ASIC sued Aware Financial Services (then known as StatePlus) for alleged fees-for-no-service activity, leading to the payment of about $105 million in compensation to members. The $1 billion-plus StatePlus acquisition was reportedly written down to about $100 million in 2021, according to an investigation by The Australian Financial Review.
In addition to adviser feedback, Travis says the index options were aimed at a growing cohort of self-directed members who had become engaged with passive investing on “philosophical” grounds. He says Aware suspects some of this cohort have been influenced by high-profile advertising by low-cost online brokers and ETF manufacturers.
Early analysis of behaviour by Aware members who signed up to the index options showed the vast majority had “partially switched” their savings into the options, rather than opting for a full transfer of their account balances.
