APRA data shows external advisers underutilised by profit-to-member funds

Only three profit-to-member funds have external advice fee expenses over $1 million, showing a massive gulf still remains compared to the retail sector.

APRA’s latest fund-level expenditure data for FY23 showed $1.38 billion in advice fees were charged, comprising of $1.19 billion paid to external financial planners, with $73 million for intrafund advice and $43.5 million for internal financial planners of super funds.

Aware Super was the biggest profit-to-member fund spender on advice ($44.3 million), followed by AustralianSuper ($29.8 million) and Australian Retirement Trust ($20 million).

But only three profit-to-member funds spent more than $1 million on external advice fees: AustralianSuper ($17.5 million) ART ($2.4 million) and Aware Super ($1.1 million).

For intrafund expenditure, ART led with $17.7 million, followed by HESTA ($12.4 million), Aware Super ($10.7 million), Cbus ($8.7 million) and UniSuper ($5.9 million).

The advice expenditure from Cbus comes before the troubled fund launched its expanded one-off retirement advice offering for $990, underpinned by its intrafund offering.

Top 10 profit-to-member fund advice expenses

Source: APRA

Platforms still dominate for external advice fees, where AMP North (Wealth Personal Superannuation and Pension Fund) spent a total of $294.5 million.

This was followed by Macquarie ($213.5 million), HUB24 ($172.8 million), Netwealth ($145.5 million) and Colonial First State ($109 million).

Top 10 retail fund advice expenses

Source: APRA

Big marketing budgets

Funds spent almost $423 million in “promotion, marketing or sponsorship”, with the top 10 biggest spenders all coming from the profit-to-member sector.

This was led by AustralianSuper ($60.2 million), ART ($41.8 million), Cbus ($34.7 million), Hesta ($34.2 million) and Aware Super ($33 million).

Of the top 10, only Aware Super spent more on advice fees than marketing, although this was mostly through their internal advice channels.

Top 10 funds for marketing expenditure versus advice fees

Source: APRA data

While Care Super and Spirit Super rounded out the top 10, the funds officially completed their merger earlier this week.

The marketing spend of the profit-to-member sector dwarfed that of their for-profit counterparts. The highest was MLC Super Fund ($11 million), Mercer Super ($9.7 million), Australian Ethical ($8.9 million) and Colonial First State ($8.1 million).

While marketing and promotions can attract new members to a fund, Finura Group co-founder Peter Worn argues there is a strong case for investing in advice which will do a better job of retaining members and therefore should be spending more on advice.

“I’m sure their levels of member engagement, retention and their ability to retain members into retirement will be much stronger because they have that relationship with a member,” Worn says.

Worn says while there is a fair argument for all businesses to spend money on promotions and sponsorships, funds also do need to be mindful about what opportunities they target.

For example, picking individual sports teams could alienate some potential members and picking local, grassroots programmes could be the better option.

“I look at the NAB sponsorship of the Auskick program in the AFL and what a wonderful thing that is,” Worn says.

“But if you’re a not-for-profit fund, some of your marketing should be considering whether it’s in the interests of members.”

Finura’s analysis of the data (below), which excluded investment related investments and external advice fees, showed the impact of advice and promotions.