Having already reached over 100 licensees covering over 3000 advisers, Vanguard believes it has found a sweet spot in the market between the industry funds and “complexity and cost” of wrap products.
The group, which entered the Australian superannuation market in late 2022 – the first new super fund trustee in Australia for many years – went live with its super product on its portal on 18 March for the roughly 12,000 advisers it works with in Australia.
While the bulk of its $1.3 billion in super fund assets have come in through direct marketing, the move will allow an increasing proportion of the sales of its superannuation products to come through financial advisers.
Vanguard Australia chief executive Daniel Shrimski tells Professional Planner the access to the super product on the portal had gone live after a pilot program launched earlier in the year.
He says Vanguard now has some 116 licensees now registered to use its superannuation portal, covering a total of some 3000 financial advisers.
“We work with more than 12,000 financial advisers across Australia,” he says.
“Advisers are a key distribution channel for us in relation to our managed fund, and our ETFs. We think they are going to be a key distribution channel for us in relation to Vanguard Super.”
After hitting the $1 billion threshold in January, the group’s total assets in the super fund have reached $1.3 billion in June.
The total super funds sold has gone up from some 10,000 members at the beginning of the year to 15,000 members in June.
Shrimski says Vanguard has taken its time to open its super products to financial advisers as it wanted to get the technology right.
“We’ve got the technology to the point where we have confidence to open it up for all advisers, but we’ve still got work to do to create an even better experience for advisers,” he says.
Looking back, Shrimski says he still believes it was right to launch the super product direct to market, before it was open to financial advisers so it could get the technology right for them.
He says Vanguard is going to continue to build its brand in the market, but it was also working on improving the ease of using the portal for financial advisers for its superannuation products.
“There is still a lot we need to do on the adviser portal to improve the client experience,” he says.
“We believe we have a product out there which is superior to a lot of what the industry super funds have out there.”
Shrimski says one of the key benefits is that it’s offering doesn’t have the complexity and cost of a full-service wrap platform.
“But we still need to take the friction out of the system and continue to enhance the technology to enable it to be as easy as possible for advisers and to ensure that we are enabling them to access Vanguard Super and create efficiency in their system,” Shrimski says.
“That is a massive priority for us – continuing to evolve that technology for advisers.”
He says Vanguard also wanted to launch its pension product in the market before it opened up to advisers so they could offer a full suite of products, which launched last December.
In line with its history of selling low-cost index funds, Vanguard is pitching itself in the Australian market for its low fee super products.
Shrimski says the firm recently dropped the total fees for its superannuation product from 58 basis points to 56 basis points.
It has also cut the threshold for a lower fee structure from balances of $800,000 to balances of above $300,000. The fee now drops down to 28 basis points for funds above $300,000.
Shrimski says the significant drop in the cap for the lower fees would be appealing for financial advisers whose clients typically have larger balances to invest than people who dealt with Vanguard directly.
Vanguard began its sales of super funds directly to the market, selling its product to people who had registered with the group, many of whom had already invested in Vanguard products such as managed funds and ETFs.
Initially focused on wholesale investors, Vanguard has been pushing to become a better-known name for retail investors in Australia.
Vanguard is arguing that its move into superannuation now allows financial advisers to offer their clients a one stop shop of Vanguard superannuation and non-superannuation products such as ETFs and managed funds.
“Advisers who use Vanguard now have a ‘whole of wealth’ offer,” Shrimski says.
“We offer both superannuation and direct investments. Industry superannuation funds can only offer superannuation, but if you are an adviser you can now offer your clients superannuation but also other products for their assets outside of super.
“That is an important part of our value proposition.”
Shrimski says the company intended to keep up its marketing campaign to get its name better known in the Australian market.
“We are not part of the award system so when people choose our superannuation fund they are making a very active decision, they are very engaged members,” Shrimski says.
Vanguard uses Australian firm Grow Inc to handle the administration of its super fund business.
“They are a start-up technology organization which specializes in superannuation administration,” he says.
“They have been critical partners for us in launching superannuation and ultimately will give us an advantage over some of the incumbents.”
He says Vanguard was also “looking at different partnerships” to help distribute its superannuation products in Australia.
“We are looking at different partnerships we can develop where there is alignment between two organisations where we can increase our distribution capabilities,” he says.
But he adds the group would also be looking to continue to build its brand direct to members.
“Vanguard has a tremendous brand with financial advisers,” he says.
“We are number one in the market, but [when it comes to] direct to member with every day Australians – as we knew at the outset – we really need to build that brand.
“But that’s not going to take a year or two years, it is going to take a lot of time, but we need to keep chipping away at that.”
Vanguard has been in Australia with a local office since 1996, offering the first index funds for Australian retail clients in 1998.
Vanguard Super is chaired by Peggy O’Neal, the chancellor of RMIT in Melbourne and former president of Australian rules football club Richmond Tigers.
