Morningstar is set to launch a ratings system to support advisers choosing super funds for clients and it hopes its track record of dealing with managed funds gives it an edge over super fund-focused incumbents in the space.
“Super funds want to lift their member engagement, but they are also focused on working with financial advisers,” Morningstar’s enterprise managing director in Australia, Peter Byrant, tells Professional Planner.
“They are looking at how they can be easy to work with for financial advisers.”
The US-based financial research house, which has some 200 hundred staff in Australia, is working on its own brand of ratings for Australian super funds which will cover performance, fees, and other features such as insurance. Byrant says it’s working closely with funds to obtain the data needed.
“We’ve now got all the publicly available data on fees, features and performance across superannuation,” Bryant says.
“We have a number of funds who are providing us with much more detailed information at the investment option level. We’re in discussions with other funds about providing us more information so we can provide the best information to members and advisers.”
However, the firm has yet to announce a time when its super fund ratings service in Australia will launch.
Bryant says most of the super funds Morningstar have been talking to were keen to provide more information for the new ratings service as they saw it as a way to provide information to financial advisers for their clients.
He says financial advisers were also keen for more information on the investment options within super funds to provide advice to their clients.
“Financial advisers really need quality research which takes into account the fees, features and performance of the super fund they are recommending to their clients,” Bryant says.
“They [financial advisers] are saying to us that they are very interested in Morningstar’s view of super funds.”
For their part, super funds want to have good connections with financial advisers but are also seeing the potential for them to become more directly involved in helping their members in a more proactive way, particularly if laws can be changed to make it easier.
The Morningstar superannuation review is expected to cover the top 20 to 50 super funds in Australia.
Morningstar currently covers over 3000 funds, ETFs, and listed investment companies globally and 231 companies on the ASX and NZ stock exchanges.
Bryant says Morningstar was currently developing its methodology for rating super funds which was different from rating managed funds.
“Our methodology for super funds will be fundamentally grounded in the approach to research that Morningstar has always taken globally,” Bryant says.
Superannuation funds are gearing up to become more directly involved in providing financial advice to their members in the light of proposed legislation following the Quality of Advice Review and the Retirement Income Covenant.
The government spent 2023 developing its response to the review’s recommendations with Minister for Financial Services Stephen Jones now shepherding the enabling legislation through Federal Parliament – a process which is proving much more challenging and time consuming than the advice industry would like.
Super funds have faced scrutiny from the government and regulators in recent years with the launch of the Your Future Your Super performance test, as well as heightened criticism over improving member outcomes.
With an increasing proportion of their members approaching or in retirement, the super funds are already developing links with financial advisers from hiring their own in-house advice staff to having links for members with preferred advisers.
“All of the funds I have talked to are very supportive of more Australians receiving financial advice,” Bryant says.
“Given that we only have around 15,000 advisers in Australia at the moment, and many more Australians needing advice, those advisers can’t possibly serve what is needed to fill the gap.”
The move into covering super funds will see Morningstar competing against existing research houses such as Chant West and SuperRatings.
Bryant says that Morningstar’s product will be different from existing research services looking at super funds.
He says Morningstar already has a strong brand in the Australian retail investment community through its ratings of managed funds and companies, which means its name and research are more familiar with the clients of financial advisers.
“We are already talking a lot to individual investors in Australia,” he says.
“All Australians who are super fund members are investors. There’s a lot of value, at the individual level, placed on our research in the community. People look to Morningstar to provide a non-conflicted view.”
Bryant argues that Morningstar’s international coverage means it can bring a global perspective to its ratings of Australian super funds.
“As a global organisation, we can bring a real depth of insight around what asset owners and pension funds look like in other markets,” he says.
“Australian super funds are increasingly benchmarking themselves against players offshore. We can bring those insights, but we can also give our colleagues offshore insights about the Australian market. There’s clearly a lot of global interest in the system.”
