16 SELF-MANAGED SUPER MANDATES 2 NEWS 3 EDITORIAL 13 SMSFs 16 INSURANCE 20 APPOINTMENTS 23 EVENTS 23 THE LEADING INDEPENDENT JOURNAL FOR THE SUPERANNUATION AND INSTITUTIONAL FUNDS MANAGEMENT INDUSTRY Making promises that can be kept Avoiding the perils of a policy quagmire More on page 14 For the latest news, visit superreview.com.au SMSF regulation – finding the right balance BY MIKE TAYLOR NOVEMBER 2010 Volume 24 - Issue 10 Tower head and shoulders above rivals
THE LEADING INDEPENDENT JOURNAL FOR THE SUPERANNUATION AND INSTITUTIONAL FUNDS MANAGEMENT INDUSTRY BY MIKE T A YLOR T ower Australia has been named Super Re- view Group Insurer of the Year for 2010, while Han- nover Re has been awarded the Super Review Group In- surer of the Year Service Level Award. It is the second year in succession that Tower has won the award, reflecting the manner in which it has built on its breakthrough success in winning the Australian- Super group insurance man- date in 2009. Tower’s win was built on the back of consolidating around the AustralianSuper mandate and growing its presence in the group insur- ance market this year by picking up mandates with National Catholic Super and IBM. The methodology utilised by Super Review in deter- mining the Group Insurer of the Year involves determin- ing the number of mandates held by insurers, the number of mandates won during the year and feedback gleaned from superannuation fund executives in a survey con- ducted through late Sep- tember and early October. Tower reclaimed the award on the weight of mandates it now holds and the survey findings, which revealed that it more than held its own with respect to claims han- dling and general customer service. In doing so, Tower ap- peared to confound a num- ber of critics who suggest- ed that the size of the AustralianSuper mandate and consequent demands would undermine the insur- er’s ability to maintain ap- propriate service levels. In determining the rank- ings for Group Insurer of the Year, Super Review also re- lied on data compiled by the Heron Partnership defining which insurers hold man- dates from particular super- annuation funds. The runner-up in this year’s award was AIA, which narrowly closed out Com- mInsure , based on having picked up the AMIST man- date and slightly higher client perceptions with re- spect to customer service. Customer service emerged as the most important factor for superannuation funds in ranking insurance providers, but price was also a signifi- cant factor. The survey also under- scored the reasons for the heavy resourcing directed to- wards winning mandates, with most funds opting to maintain their relationships with their insurers for more than five years. Asked to comment on Tower’s strong performance in the award process this year, Tower head of group life An- drew Bolderman said it was a case of seeking to understand the needs and objectives of the company’s superannuation fund clients. “I’d like to think that is the key,” he said. Acknowledging sugges- tions last year that Tower would struggle to meet the demands created by a man- date of the size of Aus- tralianSuper, Bolderman said Tower had been conscious of the challenge and had ramped up its staffing and its efforts accordingly. SR More on page 14 Tower Australia has won Super Review’s Group Insurer of the Year award in a back-to-back performance indicative of its growth strategy in the highly competitive market segment. Tower Australia goes back-to-back MANDATES 2 NEWS 3 EDITORIAL 13 SMSFs 16 INSURANCE 20 APPOINTMENTS 23 EVENTS 23 13 SUPER REFORM Avoiding the perils of a policy quagmire For the latest news, visit superreview.com.au 16 SELF-MANAGED SUPER SMSF regulation – finding the right balance Print Post Approved PP255003/01111 NOVEMBER 2010 Volume 24 - Issue 10 20 INSURANCE Making promises that can be kept It was a case of seeking to understand the needs and objectives of the company’s superannuation fund clients. 14 GROUP INSURER OF THE YEAR Tower head and shoulders above rivals
Transcript
T H E L E A D I N G I N D E P E N D E N T J O U R N A L F O R T H E S U P E R A N N U A T I O N A N D I N S T I T U T I O N A L F U N D S M A N A G E M E N T I N D U S T R Y
BY MIKE TAYLOR
Tower Australia hasbeen named Super Re-view Group Insurer of
the Year for 2010, while Han-nover Re has been awardedthe Super Review Group In-surer of the Year ServiceLevel Award.
It is the second year insuccession that Tower haswon the award, reflecting themanner in which it has builton its breakthrough successin winning the Australian-Super group insurance man-date in 2009.
Tower’s win was built onthe back of consolidatingaround the AustralianSupermandate and growing itspresence in the group insur-ance market this year bypicking up mandates withNational Catholic Superand IBM.
The methodology utilisedby Super Review in deter-mining the Group Insurer ofthe Year involves determin-ing the number of mandatesheld by insurers, the numberof mandates won during theyear and feedback gleanedfrom superannuation fundexecutives in a survey con-ducted through late Sep-tember and early October.
Tower reclaimed the awardon the weight of mandates itnow holds and the surveyfindings, which revealed thatit more than held its ownwith respect to claims han-dling and general customerservice.
In doing so, Tower ap-peared to confound a num-ber of critics who suggest-ed that the size of theAustralianSuper mandateand consequent demandswould undermine the insur-er’s ability to maintain ap-propriate service levels.
In determining the rank-ings for Group Insurer of theYear, Super Review also re-lied on data compiled by theHeron Partnership definingwhich insurers hold man-dates from particular super-annuation funds.
The runner-up in thisyear’s award was AIA, whichnarrowly closed out Com-mInsure, based on havingpicked up the AMIST man-date and slightly higherclient perceptions with re-spect to customer service.
Customer service emergedas the most important factorfor superannuation funds inranking insurance providers,but price was also a signifi-cant factor.
The survey also under-scored the reasons for theheavy resourcing directed to-wards winning mandates,with most funds opting tomaintain their relationshipswith their insurers for morethan five years.
Asked to comment onTower’s strong performance inthe award process this year,Tower head of group life An-drew Bolderman said it was acase of seeking to understandthe needs and objectives of thecompany’s superannuationfund clients.
“I’d like to think that is thekey,” he said.
Acknowledging sugges-tions last year that Towerwould struggle to meet thedemands created by a man-date of the size of Aus-tralianSuper, Bolderman saidTower had been conscious ofthe challenge and hadramped up its staffing and itsefforts accordingly. SR
13 SUPER REFORMAvoiding the perils of a policyquagmire
For the latest news, visit superreview.com.au
16 SELF-MANAGED SUPERSMSF regulation – finding the right balance
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NOVEMBER 2010 Volume 24 - Issue 10
20 INSURANCEMaking promises that can be kept
It was a case of seeking to
understand the needs and objectives
of the company’ssuperannuation
fund clients.
14 GROUP INSURER OF THE YEARTower head and shoulders above rivals
MandatesReceived by Type of mandate Issued by Amount
Colonial First State Global resources NGS Super $30 million
2 PAGE TWO www.superreview.com.au
SUPERREVIEW * NOVEMBER 2010
NOVEMBER 2010 * SUPERREVIEW
www.superreview.com.au NEWS 3
MEMBERS of superannua-tion funds which hedgestrongly against the risingAustralian dollar were wellrewarded during September,according to new data re-leased by Chant West.
The Chant West analysis, re-leased today, has revealed thatthe median growth superan-nuation fund returned a
healthy 2.4 per cent, resultingin a 4.3 per cent gain for thefirst quarter of the new finan-cial year.
Chant West principal War-ren Chant said that surgingshare markets in Australia andoverseas had been the primarydrivers for the rise and thatwhile most funds now includ-ed a variety of alternative as-
sets in the investment mix, ithad been traditional listedshares that had accounted formost of the performance.
“After a negative August, Sep-tember was a bumper monthfor Australian and internation-al shares and this led to strongreturns for growth funds,” hesaid. “However, currency wasalso a very important factor and
the funds that did best werethose that hedged more againstthe rising Australian dollar.”
Chant said that retail mas-ter trusts with their higherweightings to listed shares hadoutperformed industry fundsin September, albeit that in-dustry funds continued to holdthe advantage over the longerterm. SR
MySuper an appallingprospect, says expert
ACTU pans inequitable super tax
ESI Super employs Provisio rapid advice solutionINDUSTRY super fund ESISuper has extended its adviceoffering with Provisio Tech-nologies’ rapid advice softwaresolution, according to ESISuper’s chief executive, RobynPetrou.
Petrou stated that the rapidadvice software solution was“the perfect complement” to itsexisting advice offering.
“The rapid advice technolo-gy will allow us to providemore flexibility in the way that
members interact with us, andallow our advisers to demon-strate the benefits of differentinvestment strategies in realtime to a wider group of mem-bers,” he said.
The software solution speedsup the provision of a Statementof Advice and allows for adviceto be given over the phone asthe adviser demonstrates sce-narios in real time online.
Provisio director CameronO’Sullivan said solutions such
as this allowed super funds tobroaden their advice reach.
“With pressure on fees, ad-vice models must now supporta quicker provision of advice,”he said. “By producing a qual-ity Statement of Advice quick-ly, each member can be cateredfor in a fraction of the time oftraditional models.”
ESI Super joins the likes ofSuperpartners and HESTA,which are also using Provisio’ssolutions. SR
Dollar hedge assists September returns
Warren Chant
AN industry commentator atthe Australian Institute ofSuperannuation Trusteessuper insurance symposiumhas hit out at the “mediocrity”of MySuper, labelling its ac-ceptance of current super in-surance cover “appalling”.
Speaking on a panel at thesymposium, Carol McKelson-Timmins, the chief operationsofficer of Health Super, saidshe was “philosophically,greatly opposed” to MySuper’sacceptance of the current in-adequate insurance cover ofsuper fund members.
“When MySuper came outI can’t tell you how appalled Iwas to see the giving in tomediocrity, the mediocritythat says it’s okay to let thesepeople not have enough cover,to let them go into a situationwhere if they have an acci-dent, their loved ones won’thave enough left,” she said.
Health Super has a hugepreponderance of women,many divorced, many in theirmid 50s and carrying bur-dens, and the number ofthem who are underinsuredis appalling, despite thesuper fund’s best efforts,McKelson-Timmins said.
Allowing funds to cross sub-sidise will help them with on-going education of their mem-bers about insurance needs,and there are very practicalthings super funds can do tohelp customers assess their
own worth and get insurance,she said.
Making clients realise abouttheir own underinsurance waspart of furthering financial lit-eracy, she said.
McKelson-Timmins warnedthat any continued downwardpressure on insurance premi-ums would lead to marginsqueeze on life insurers, andif there was a deterioration inclaims, it would create a largemargin squeeze on insurers.
“It’s my view that some ofthis is not sustainable in themarket,” McKelson-Timminssaid.
“Whether we like it or not,we are in the not-for-profitsector and the insurers are inthe opposite sector, they haveshareholders, they must makea profit after tax and returnsto the shareholders.”
Any more downward pres-sure would force a price in-crease for insurance, shesaid. SR
Carol McKelson-Timmins
THE tax on super contributions for low-incomeworkers is deeply unfair and inappropriate, ac-cording to Australian Council of Trade Unions(ACTU) assistant secretary Tim Lyons.
In a wide-ranging speech at an Australian In-stitute of Superannuation Trustees lunch in Syd-ney, Lyons also called for super funds to invest morein local infrastructure and dismissed criticismof an increase in the superannuation guarantee to12 per cent.
“It is ridiculous that low-income workers paymore tax on their super than they would payon earned income, and we are pleased that theGovernment has announced a proposal for arebate for those earning less than $37,000 peryear,” Lyons said.
The current superannuation guarantee of 9 percent would not be enough for many workers, par-ticularly casual, part-time and female employees,he said. A shift to 12 per cent would help bridgethat gap, but in the long term a move to 15 per centwould be beneficial, he said.
The super system was never intended to be a re-placement for the pension system but rather thetwo were designed to be complementary, he said.
Lyons described the gradual increase in the su-perannuation guarantee in 0.25 per cent increments
as a “telegraph punch” and said it would be difficultfor employers to argue that an increase that gradualwould be difficult to incorporate.
Jeremy Cooper’s MySuper recommendation isa vindication of the industry super model in termsof the investment portfolio, the risk and the sim-plicity – but it also posed a threat to that model,he said.
Australian super funds also need to find bet-ter ways to invest Australian workers’ capital inlocal infrastructure products without compro-mising investment returns, he said.
“It is unacceptable that super funds in Australiacan routinely find it easier to invest in infra-structure projects overseas than in Australia,”he said.
“The Government needs to take better accountof funds management decisions and design a taxand procurement framework that facilitates in-vestment by funds in an Australian context. Toomany Australian infrastructure projects involve highfees and suit investment banks and constructionconsortiums but not super funds,” he said.
Lyons also called on industry super funds to con-tinue to put downward pressure on the fees thatmembers pay and to be more engaged in envi-ronmental, social and governance issues. SR
SUPERREVIEW * NOVEMBER 2010
PROFESSIONAL Associa-tions Super achieved a net re-turn of 10.8 per cent for its de-fault growth option for the yearto 30 June, 2010 by taking alow-cost approach and focus-ing on traditional asset class-es, placing it in the top quar-tile of industry super fundswith similar risk profiles, thefund has announced.
Professional AssociationsSuper chief investment officerPaul Kessell said the perform-ance was due to a clearly definedinvestment strategy and focus onrisk management.
“We actively invest in a diver-sified portfolio of traditional ex-posures – in particular, equitiesand bonds – and generally avoidmany of the more complex and un-listed assets that have proliferat-ed across industry super fund port-folios in recent years,” he said.
The fund’s annual investmentfee of less than 0.4 per cent isbelow the industry super fund av-erage, he said.
“It proves that it is about hav-ing the right skills, process andinvestment governance, ratherthan the size of the fund, that arethe critical factors.” SR
BY CHRIS KENNEDY
INVESTOR sentiment has slipped a fur-ther 0.5 points to negative 9 points overthe most recent quarter, although mostinvestors said they would maintain or in-crease their voluntary super contribu-tions, according to the latest FinancialServices Council (FSC)/CoreData In-vestor Sentiment Index.
Sentiment is 13 points higher thanit was at the beginning of 2009 but hasdropped more than 16 points from whereit finished in 2009, according to the sur-vey of 770 participants from CoreDa-ta-brand management’s proprietary
database of investors, whose answerswere calibrated to Australian Bureau ofStatistics population data.
Despite the negative sentiment, three-quarters of investors expected to main-tain their current level of superannua-tion commitments and almost one-sixthexpected to increase their contributionswhile just 6.5 per cent expected their con-tributions to decrease, the survey found.
Two-thirds of those without a super funddid not feel financially secure, while morethan half of those with a super fund did,but despite this 28.8 per cent of investorswere unhappy with their super funds.
“While sentiment did not deteriorate
significantly, it is clear investors remainuncertain about the future,” said FSCchief executive John Brogden.
“Investor uncertainty is not surprisinggiven the concerns about the Europeanand US economies and the recent peri-od of political upheaval resulting in Aus-tralia’s first minority Government in 70years,” he said.
While investors are reluctant to investnew money, their satisfaction with exist-ing investments remains consistent withthe last quarter at 37.7 per cent, and a fur-ther 37.6 per cent were neutral, he added.
Steady interest rates over the pastthree months provided a reprieve for
mortgage owners and meant the averagehousehold was slightly better off thisquarter, according to Kristen Paech,head of advice, wealth and superannu-ation, at CoreData.
“However, the expectations aroundfuture economic growth suggest Aus-tralians remain unconvinced that thefuture is bright, despite the market re-covery,” she said. SR
THE Coronation Drive OfficePark Building 4 in Brisbane,which is jointly owned byAMP’s Australian Core Prop-erty Portfolio and Sunsuper,has been awarded a five-stargreen office rating by theGreen Building Council ofAustralia.
The award, which is based on
the environmentally sustain-able construction of buildings,demonstrates AMP Capital’scommitment to sustainableprojects, according to AMP’sAustralian Core Property Port-folio Fund manager, LouiseJoslin.
The Coronation Drive OfficePark Building 4 is a state-of-
the-art ‘green’ building withan environmental design rat-ing and energy efficient cre-dentials, and is the first five-star ‘as built’ building withinthe AMP Australian Core Prop-erty Portfolio, she said.
The energy and water sav-ings associated with the de-sign equate to 270 less cars on
the road and 2.7 Olympicswimming pools of water savedper year.
Sunsuper chief investmentofficer David Hartley said thebuilding was now fully occu-pied, and the fund is now aim-ing for a five-star rating on thefit-out on the floors it occupiedas well.
“Having a fully-tenantedbuilding means our invest-ment is not only reaping fi-nancial benefits, but membersand our staff can feel goodabout being part of a projectwhich is industry-leading interms of its environmental rat-ing and energy efficiency,” hesaid. SR
AMP/Sunsuper building gets five-star green rating
THE Industry Super Network (ISN) has againsought to ramp up its campaign against com-mission-based remuneration linked to super-annuation, calling on retail super funds “to cat-egorically rule out any reporting method for
returns which fails to disclose costs such as on-going advice fees or commissions.
The ISN statement, issued by the organisation’schief executive David Whiteley, represents a clearattack on the Financial Services Council’s rec-ommended reporting standards.
Whiteley said that the decision by the re-tail super sector to adopt a reporting methodwhich does not include ongoing advice fees andcommissions raised a number of regulatory andconsumer protection concerns.
“Given the compulsory nature of super, fundshave a higher duty of care to their members,”Whiteley said. “This duty of care includesthe transparent reporting of fund returnsnet of all taxes and expenses.”
He said the ISN would support the Govern-ment working with the sector to develop in-dustry-wide protocols for transparent and com-parable reporting of investment returns.” SR
Industry funds hit at commissions - againProfessional Associations Superspruiks low-cost approach
David Whiteley
SUPERREVIEW * NOVEMBER 2010
6 NEWS www.superreview.com.au
Smaller funds more responsiveSMALL to medium-sized superan-nuation funds appear to be movingmore quickly than their largercousins to offer innovative mem-ber services, according to the chiefexecutive of mid-size fund IntrustSuper.
Intrust chief executive BrendanO’Farrell said medium-sized fundshad found it easier to stay connect-ed with their membership and, withthe addition of key services such
as travel and general insurance,were providing a better overall mem-ber experience.
He cited the addition of offeringssuch as car, home and contents andtravel insurance as ideal additions tohis fund’s product suite and proof thatbeing big did not necessarily meanbeing better in terms of deliveringto fund members.
O’Farrell’s comments on the abili-ty of medium-sized funds to deliver
follow its launch of a stand alone not-for-profit financial planning business– Intrust360.
“Medium and smaller funds areoften able to move faster and more ef-ficiently to develop innovative prod-ucts and enhance their members’ ex-periences,” he said.
O’Farrell’s comments run counterto at least some of the recommen-dations of the Cooper Review, whichsuggested fewer and larger funds. SR
BY CHRIS KENNEDY
THE Canada Pension PlanInvestment Board (CPPIB)will use SimCorp’s flagshipDimension product for in-vestment operations andperformance measurement,SimCorp has announced.
The $130 billion fundpreviously outsourced theseoperations to a third party
but was now internalisingits portfolio recordkeeping,accounting and perform-ance measurement func-tions, SimCorp said.
SimCorp Dimension wasable to support the breadthof CPPIB’s complex opera-tional processes and providethe scalability needed tomeet the needs of its exist-ing, new and growing in-
vestment programs, ac-cording to SimCorp.
“What stood out to us im-mediately was the level ofintegration between invest-ment operations and per-formance processes thatSimCorp Dimension pro-vides,” said Benita Warm-bold, senior vice presidentand chief operating officerat CPPIB. SR
Brendan O’Farrell
SimCorp picked up by bigCanadian pension fund
CommInsure appoints wholesale underwriting managerCOMMINSURE has ap-pointed Huw Parry as itsnew executive managerfor wholesale underwrit-ing after an extensive mar-ket search, the insurer an-nounced.
Parry will join CommIn-sure on 15 November afterpreviously working as agroup risk underwritingmanager at ING for fiveyears.
Parry has worked in in-
surance since 1996, startingout in the UK before join-ing AIA New Zealand in2000, where he held under-writing and business devel-opment roles, before movingto Australia in 2006. SR
Future Fund offloads Telstra in portfolio rebalanceTHE Future Fund has sold 113.6 million Tel-stra shares, reducing its holdings in the com-pany from 10.9 per cent to 10 per cent.
The on-market sale was part of thefund’s long stated objective of rebalanc-ing the portfolio by reducing its holding inTelstra over the medium term, the fund’sboard of guardians advised at a senate es-timates hearing.
The sell-down was executed at an aver-age price of $2.66 between 29 Septemberand 19 October. The board’s selling activi-ty was conducted smoothly and in an orderlymanner to avoid untoward market impact,
averaging less than 14 per cent of the vol-ume of Telstra shares traded over the pe-riod, the fund stated.
Proceeds from the sale will be integratedinto the broader portfolio and the board an-nounced it intends to continue rebalancingits portfolio in an orderly manner over themedium term.
Relevant considerations for the sale in-cluded the February 2010 expiry of theboard’s self-imposed lock-up, equity marketconditions and liquidity, and the assessmentof alternative investment opportunities, theboard stated. SR
THE cost of living for aretired couple who live‘comfortably’ is down 0.2per cent on June fig-ures, according to newfigures from the West-pac ASFA (Associationof SuperannuationFunds of Australia) Re-tirement Standard.
The 0.2 per cent de-crease compares to anoverall 0.6 per cent in-crease in the consumerprice index (CPI), whichwas inflated by the in-creased tobacco excise,but Retirement Standardbudgets don’t incorpo-rate a tobacco allowance,according to ASFA.
Other factors were a
large drop in recreationcosts due to decreases indomestic and overseasholiday travel and ac-commodation costs. Au-diovisual and computingequipment costs werealso down.
This year has also seena slight drop in the costsof fruit and vegetablesdue to easing of thedrought.
The cost of healthservices rose due to anincrease in insurancepremiums and trans-port costs were also upslightly due to risingpetrol prices.
Because retirees tendto own their own homes
they are less affected byhousing costs and alsospend less on educationservices.
Overall, a couplelooking to achieve acomfortable retirementneeds to spend $53,456a year, while those seek-ing a ‘modest’ retire-ment lifestyle need tospend $30,382 a year,ASFA stated.
For the purposes ofthe study, a comfortablelifestyle included a broadrange of leisure andrecreational activitiesand travel, while a mod-est lifestyle included onlyfairly basic activities, ac-cording to ASFA. SR
Retirees’ cost of living down this quarter
QIC launches alternative to ILBsQUEENSLAND-based institutionQueensland Investment Corporation(QIC) has launched a new product:the QIC Global Fixed Interest Infla-tion Plus Fund.
The product, developed by QIC’sGlobal Fixed Interest boutique, hasbeing marketed as delivering inflationplus returns with less volatility.
The company said the fund wouldactively manage interest rate andinflation exposures separately to de-liver a return target of AustralianConsumer Price Index plus 4 percent a year over a rolling three-yearperiod.
Announcing the new product, QICGlobal Fixed Interest managing di-rector Susan Buckley said the tra-ditional approach to protecting
against inflation from a fixed incomeperspective had been to invest in in-flation-linked bonds.
“But this approach has a number oflimitations which impact on invest-ment outcomes,” she said. “Many in-vestors don’t realise that a key risk inan inflation-linked bond benchmarkis interest rate risk, not inflation risk,”she said.
“A typical inflation-linked bondbenchmark can have nine years of in-terest rate duration, which can resultin significant volatility for investors inwhat is often thought to be a con-servative investment strategy,” Buck-ley said. “In a rising interest rate en-vironment, the long duration of thesebenchmarks can also lead to negativereturns.” SR
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SUPERREVIEW * NOVEMBER 2010
BY CHRIS KENNEDY
THE rise of self-managed retirement in-vesting will present an increasing chal-lenge for regulators, because they willneed to protect investors who may nothave appropriate investment experiencefrom gambling away their retirementsavings, according to BT Financial chiefexecutive Brad Cooper.
The current focus of regulatory re-form around raising industry standards isright for our current needs but the nextbig regulatory move will be around pro-tecting many investors from their own abil-ity to derail their own financial security,
Cooper said at the Finsia Financial Ser-vices Conference in Sydney yesterday.
Rules and regulations have already sur-faced in this segment of the industry tomake sure investors don’t rort the system,such as preventing investments in art-works or lifestyle assets, and this approachwill need to round down and provide moreprotection to some investors, he said.
“The alternative is just to say ‘look,if you want to do it yourself then just gofor it’ and let the self-directed investorslive according to the consequences ofthat,” he said.
But there isn’t a plan B for people whohave great intentions and enthusiasm
but not the requisite time, expertiseor access to information, and they couldend up gambling away their retirementsavings, which is a risk our country can’t
afford to take, he said.Three key themes for the future are
developing a sustainable retirement sys-tem, the responsible investment of re-tirement savings, and protecting con-sumers, Cooper said.
He also called for the urgent imple-mentation of SuperStream reforms andthe use of tax file numbers to help sim-plify the rollover process.
Near term imperatives for the sec-tor are to restore investor confidenceand trust, to lift engagement levels, toget more efficiency and hence greaterreturn, and to attract and retain the bestpeople, he concluded. SR
THE Association of SuperannuationFunds of Australia (ASFA) hascalled for a bipartisan consensuson superannuation policy settings,reinforcing its support for the superguarantee increase to 12 per cent.
ASFA chief executive PaulineVamos said the first two steps shouldbe ensuring Australians put in enoughmoney for retirement and making thetaxation treatment certain to encour-age additional contributions.
“The constant risk that ‘things willchange’ is detrimental to achieving apublic policy outcome that reducesreliance on the age pension, partic-ularly with the ageing population,”Vamos said.
She claimed increasing the SG asa means to increase the super savingspool was the best way to achieve bet-ter retirement outcomes, adding ASFAresearch and analysis indicated thatthe adoption of the Henry Report’s
recommendations on superannuationwould not be as effective in deliveringadequate retirement incomes.
“The Henry proposals, if adopt-ed, would reduce retirement savingsfor many, if not most Australians andwould involve a range of implemen-tation and equity problems. Theywould also be a disincentive for themajority of middle income Aus-tralians to save further for their re-tirement,” Vamos said.
ASFA research found that increas-ing the SG would boost an average Aus-tralian’s retirement savings by $110,000and aggregate national retirement sav-ings by half a trillion dollars.
According to Vamos, the ShadowTreasurer is “wrong to paint the in-dustry superannuation sector as beingcontrolled by the union movement”,adding all sectors of the industry havebeen calling for an increase in thesuperannuation guarantee. SR
SELF-MANAGED super funds(SMSFs) are getting ready toredirect about $32.2 billion in in-vestments to residential prop-erty, but a lack of knowledgecould have costly consequences,according to Perpetual PrivateClients and Capital 360.
Perpetual Private Clients andCapital 360 stated that moreSMSFs were looking to invest inresidential property, but therewas a lack of knowledge around
borrowing and how residentialproperty fits into a portfolio.
According to their estimates,approximately 15 per cent of theexisting allocation to cash andshares of SMSFs – worth about$34.2 billion – would be re-deemed to acquire property overthe next few years. However,many SMSF trustees did notseek specialist advice and there-fore were not aware of the po-tential tax implications and
penalties that may be incurred,they stated.
Senior manager strategic ad-vice at Perpetual Private Clients,Chris Balalovski, said recentlegislative changes had led toa noticeable rise in the numberof clients seeking advice andstrategic guidance on borrow-ing arrangements in SMSFs.
Balalovski asserted thattrustees needed to ensure theyunderstood the legislative and
compliance requirements. “Firstly, it must be established
that the trust deed allows a bor-rowing. The strict rules thenstate that the borrowing mustbe in line with the fund’s in-vestment strategy and take intoaccount the future financialneeds of all members,” he said.
“Failure to do so may result ina fund becoming non-complyingand losing its tax concessions.It’s also important for trustees
with existing arrangements tohave their deed reviewed to en-sure they comply.”
He added that the nature ofthe holding trust, which had thecustody over the property, andthe details of the loan docu-mentation were commonly neg-lected.
“The result of this could meanunexpected stamp duty and cap-ital gains tax liabilities,” Bal-alovski said. SR
SUPERANNUATION funds cannot hope toestablish trust with their clients simply bycommunicating with them, according toMetlife head of product, pricing and rein-surance, Richard Anderson.
Speaking at the Australian Institute of Su-perannuation Trustees super insurance sym-posium, Anderson said the only way to es-tablish trust with fund clients was by offeringsomething valuable to them, like free advice.
There was a trend for people to increas-ingly ignore traditional authority figures, suchas bank managers, and trust instead in newmodels of authority like “money saving ex-perts”, Anderson said.
“The only way to establish trust today is byoffering something valuable or credible toyour customers, while interaction with themdoesn’t offer any value, it actually underminesyour authority,” he said.
Anderson also suggested that super fundsshould engage with the membership by “pig-gybacking” off their client’s existing routine.
“People tend to find things simple that theydo over and over again, so if you can piggy-back [off] an already existing routine, the
chances are that you’re likely to engagethem,” he said.
Customers also tend to “navigate” throughconfusing or distracting material to find out ifsomething is valuable to them, so super fundsshould create easy methods or “shortcuts”through distracting information, in order toshow the value of their services, Anderson said.
“Highlighting something that helps ourclients take these shortcuts means our cus-tomers are less likely to pass over us, orour products or services,” he said. SR
Self-managed investors need protection from themselves
8 NEWS www.superreview.com.au
Brad Cooper
New SMSF borrowing rules spark interest in residential property
SUPERANNUATION funds should in-clude all member benefit projections,including age pension entitlements inannual member statements, accordingto an Institute of Actuaries of Aus-tralia survey.
The majority of respondents, who in-cluded super fund chief executives,senior management and actuaries, alsoagreed that providing projectionswould encourage members to increasetheir voluntary contributions by givingthem a more accurate idea of how well
off they would be in retirement.Institute of Actuaries chief executive
Melinda Howes said that results showedstandardised assumptions, includingboth a lump sum and annual income es-timate and age pension entitlements,would be among the best ways to pro-duce meaningful projections.
While the vast majority of respondentsagreed assumptions on how to calculateinvestment returns should be stan-dardised across the industry, slightlymore than half believed fees shouldbe specific to the super fund, rather thana standardised fee assumption.
About 60 per cent of respondentsagreed a projection should be provid-ed to individual members based on theinvestment strategy that they have cho-sen, such as conservative, balanced orgrowth.
Projections should vary based on in-vestment strategy and show a range ofoutcomes for different investment op-tions or different contribution rates,the survey found, although some re-spondents said it would be better tokeep projections as simple as possible.
“There is a need to balance theamount of information provided in a
superannuation benefit projection withthe goal of providing a useful tool formembers,” Howes said.
“The form [projections] should takeand how they are calculated is a mat-ter for debate but the most importantfactor should be that it helps peoplesave for retirement,” she said. SR
Telstra Super launches calculator LARGE corporate fund Telstra Super has broken newground by launching a publicly available retirementcalculator that incorporates an investment marketsimulator.
Telstra Super’s general manager of client devel-opment, marketing and communications, KevinMoloney, said the Telstra Super Simulator would allowusers to generate a realistic whole of life snapshotof how their current savings plan would position themfor retirement.
He said the simulator complemented the servicesof Telstra Super Financial Planning.
“By accessing the simulator through our secure Su-perOnline portal, members will see relevant infor-mation automatically populated, including their age,super balance and investment choice,” Moloney said.
He said this would provide members with an im-mediate idea of how their current savings behav-iour compares to what they might have been hopingfor. SR
Professional AssociationsSuper announces PacelinesponsorshipPROFESSIONAL Associations Super hasannounced it will sponsor the Paceline rideto help raise awareness and funds for peo-ple suffering from cardiac arrhythmias.
National sales manager for ProfessionalAssociations Super Mark Ashburn will beone of the 20 riders who will ride 1100kmalong the coast from Adelaide to Melbournefrom 16 to 23 October.
“Professional Associations Super existsto help people make their lives easier inretirement,” Ashburn said.
“With more than 400,000 Australians hav-ing one kind of cardiac arrhythmia and thatnumber increasing in prevalence as peo-ple reach retirement age, this is an op-portunity to help make retirement easierphysically, as well as financially,” he said.
Ashburn hopes to raise $60,000 throughthe ride, which he is completing for thesecond time.
“In the past three years, Paceline hasraised over $30,000 for the Baker IDIHeart and Diabetes Institute and the Vic-tor Chang Cardiac Research Institute,with rides across the USA and from Mel-bourne to Sydney. This year, ProfessionalAssociation Super has donated $5000 toBaker IDI to help Paceline reach their tar-get and develop a better understandingof the cause and cures of cardiac arrhyth-mias,” he said. SR
THE Minister for Superannuationand Financial Services, Bill Short-en, has released a discussion paperon the design and implementationdetails of the Government’s new in-come tax system for managed in-vestment trusts (MITs).
The Government announced thenew tax system for MITs earlierthis year and said it would removethe longstanding uncertaintyaround the treatment of the in-come of MITs.
Shorten said key features of thenew MIT tax system include anelective ‘attribution’ system of tax-ation under which investors will betaxed only on the income thetrustee allocates them and the abil-ity to remove double taxation thatcan arise in certain circumstances,
among others.“Once implemented, the Gov-
ernment’s reforms will increasecertainty for managed funds, re-
duce complexity and lower costsfor MITs and their investors,” saidShorten, adding these changes willtake effect from 1 July, 2011.
A further round of public con-sultation on exposure draft leg-islation is planned for later thisyear, while it is expected that leg-islation will be introduced intothe Parliament in the first half of2011.
Two major features of the newtax system for MITs have alreadybeen legislated. The trustee of aMIT can choose to apply the cap-ital gains and losses regime to thedisposal of eligible assets. Also,most foreign investors will have areduced rate of final withholdingtax of 7.5 per cent applied to fundpayments from a MIT. SR
Pension should be includedin super projections
10 NEWS www.superreview.com.au
Melinda Howes
Bill Shorten
Shorten releases discussion paper on MIT tax system
Because at MetLife, our technology is designed to provide a great customer experience.MetLife’s complete e-Toolkit makes doing business with MetLife easy. You can rely on MetLife to provide a great customer experience for you and your members through our leading technology solutions.
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it helps to have all the answers at your fingertips.
For most of the past decadethe Australian financial serv-ices industry has lobbied
successive governments on theissue of making adjustments tothe tax system sufficient to allowpeople to be migrated out of cost-ly and outdated legacy productswithout financial detriment.
Thus, there will be many inthe industry who would havebeen disappointed to note a linkbeing made between Govern-ment action on legacy productsand the Cooper Review’s My-Super concept – it representsa dangerous combination of pol-icy ingredients and, arguably,one that should be avoided.
The impact of legacy productson both consumers and finan-cial services businesses has beenan issue now handled by nofewer than five ministers. It alsorepresented one of the first is-sues discussed by the formerMinister for Financial Services,
Chris Bowen, when he assumedthe portfolio from Senator NickSherry in August last year.
At that time, Bowen refer-enced the “lack of a mechanismto deal with old legacy products”and the consequent need for“a more streamlined approachto product rationalisation”.
It says something aboutBowen’s intentions that by themiddle of last December he hadreleased a proposals paper “as thenext step in consultation withstakeholders on product ratio-nalisation for managed funds andthe life insurance industries”.
In doing so, he describedproduct rationalisation as being“a process of converting or con-solidating products, such asmanaged fund or life insuranceproducts, of a similar nature intoa single product with equivalentfeatures and benefits”.
“The proposed product ra-tionalisation mechanism offersa specific solution to the rangeof issues involved in theprocess of removing outdatedproducts and transferring in-vestors into newer and betterproducts,” Bowen said. “Im-portantly, a proposed ‘no dis-advantage’ test would ensureinvestors are not disadvantagedby product rationalisation.”
Bowen’s proposals paper out-lined proposed tax relief forproduct rationalisation and ar-gued that the rationalisationmechanism would benefit in-vestors by transferring them intomodern products with superi-or features.
Responses to the Govern-ment’s proposals paper closedin late February this year, andnine months and one FederalElection later, the issue appearsof be in danger of becoming un-duly enmeshed in the debateand consultations flowing fromthe Future of Financial Advice(FOFA) reform proposals andthe recommendations of theCooper Review.
Given Bowen’s own analysis inAugust last year that the major-ity of legacy product issues relateto insurance and funds manage-ment products, roping the issueinto the FOFA and Cooper pro-posals not only risks imposing fur-ther unwarranted delay, but alsothe creation of an overly complexdebate encompassing unquali-fied stakeholders.
While some might argue thatthe MySuper concept representsthe ultimate in product consoli-dation, this is a dangerous mis-conception. If MySuper is to bedebated at all, it must be debat-ed as a single and separate issue– not something that would standin the way of progress on crucialand self-evident initiatives suchas product rationalisation and Su-perStream.
Indeed, in circumstances
where some leading industry fig-ures have questioned whetherMySuper can actually deliver thecost savings it promises and ata time when Federal politiciansare demanding that major pol-icy initiatives be subject to costbenefit analyses, there is goodreason to keep MySuper out ofthe immediate policy mix.
The new Assistant Treasurerand Minister for Financial Ser-vices, Bill Shorten, has been fru-gal in his public utterances on hisimmediate priorities with respectto policy implementation, butthings were expected to becomeclearer after an address to a Fi-nancial Services Council functionin late October and during hisopening of the Association of Su-perannuation Funds of Australianational conference in Adelaide.
Shorten has already indicat-ed that the Government remainsfocused on simplifying the su-perannuation system but heclearly appreciates that the po-litical realities inherent in ahung Parliament will limit thedegree to which he can move.
In those circumstances, therewould be many in the financialservices industry who would beurging the minister to pursuethe immediately sensible anddoable: product rationalisationand SuperStream.
Between them, product ra-tionalisation and SuperStreamwill simplify the operation of theindustry and reduce costs to con-sumers and superannuationfund members. SR
The Government must pursue the doable priorities of
product rationalisation and SuperStream or risk a policy
implementation quagmire.
Mike Taylor
REED BUSINESS INFORMATION475 Victoria Avenue, Chatswood NSW 2067Locked Bag 2999, Chatswood Delivery Centre, Chatswood NSW 2067Ph: (02) 9422 2999 Fax: (02) 9422 2822www.reedbusiness.com.au
PRODUCTION Junior Designer/Production Co-ordinator – Andrew LimPh: (02) 9422 2816email: [email protected] Designer – Ben YoungChief Sub-editor – Robert RiversSub-editor – Tim Stewart
CIRCULATIONCustomer Service EnquiriesPh: 1300 360 126Fax: (02) 9422 2633Subscriptions:One year - 11 issues: $195.00 incl GSTNew Zealand: One year - $205.00Other International: One year - $215.00
Average Net DistributionPeriod ending Mar ‘102,327
While some mightargue that the
MySuper conceptrepresents the
ultimate in productconsolidation, this is
a dangerousmisconception.
SUPERREVIEW * NOVEMBER 2010
14 GROUP INSURER OF THE YEAR www.superreview.com.au
Tower Australia Limited’sdeliberate and continuingpush into the group in-
surance space off the backof winning the AustralianSu-per mandate in 2009 has seenit named as Super Review’sGroup Insurer of the Year fora second successive year.
Tower reclaimed the awardon the weight of mandates itnow holds and the findings ofSuper Review’s Group Insur-er of the Year survey, whichrevealed that it more thanheld its own with respect toclaims handling and generalcustomer service.
While AustralianSuperrepresents the undoubtedfoundation of Tower’s groupinsurance business, it holdsaround 18 other mandatesincluding two significantwins in the past 12 months –National Catholic Superan-nuation Fund and IBM.
As part of the awardprocess, Super Review reliedon a Heron Partnership as-sessment matching group in-surance mandates to partic-ular insurers.
The runner-up in thisyear’s award was AIA, whichnarrowly closed out Com-mInsure based on havingpicked up the AMIST man-date and slightly higherclient perceptions with re-spect to customer service.
However what becameclear in Super Review’s sec-ond annual Group Insurer of
the Year research is that themajor insurers are preparedto be highly competitive onprice when competing formandates from the major su-perannuation funds.
While customer servicewas nominated as being ofprimary importance byclients, price emerged as thesecond most important fac-tor. What is more, priceseemed to be the commondenominator with respect todifferentiating the marketleaders – Tower, Hannoverand CommInsure.
Asked what they regard-ed as the major strengths oftheir group insuranceproviders, a significant ma-jority of the respondents(84.7 per cent) nominatedcustomer service, while 53.9per cent nominated price.
However price appeared tobe a particularly dominantfactor with respect to thefunds that nominated Tower,Hannover and Comminsureas being their group insur-ance providers.
The survey also revealedone of the major reasons forthe strong competition formandates in the sector: a dis-tinct lack of short-termchurn.
According to respondentsto the survey, most mandateshad extended beyond fiveyears with almost 100 percent of the funds surveyedsuggesting that they would
be prepared to shortlist theirexisting provider if they werecalling for renewed expres-sions of interest.
While the survey suggest-ed that the levels of serviceprovided by group insurerswas generally of a high stan-dard, some of the insurersappeared to be less well re-garded than others.
Tower emerged as winnerfor a second year on the basisthat around 60 per cent of itsclient respondents rated itsclaims handling and cus-tomer service as excellent,while CommInsure sufferedbecause while 60 per cent ofits customer respondentsrated its claims handling andcustomer service as ‘good’,only 40 per cent rated it as‘excellent’.
AIA rated marginallyahead of Comminsure witharound a 50/50 split betweencustomers rating its claimshandling and customer serv-ice as ‘good’ or ‘excellent’.AIA also received bettermarks with respect to prod-uct design.
The winner of the SuperReview Group Insurer of theYear Service Level Award for2010 was Hannover, with 70per cent of customer re-spondents rating its cus-tomer service and claimshandling as ‘excellent’. Smallspecialist provider Aus-tralian Income Protectionalso rated highly, but lost outto Hannover because of therelatively small size of itscustomer base.
Where product designwas concerned, both AIAand Metlife emerged at thetop of the survey results,closely followed by Towerand Hannover. SR
Source: CEA/Super Review *More than one answer provided
www.superreview.com.au GROUP INSURER OF THE YEAR 15
NOVEMBER 2010 * SUPERREVIEW
Source: Heron Partnership
1 Accountants Superannuation Fund CommInsure CommInsure
2 AESuper – Australian Enterprise Super CommInsure CommInsure
3 AGEST CommInsure CommInsure
4 AMG Universal Super – Personal Hannover Life Re Hannover Life Re
5 AMG Universal Super – Employer Hannover Life Re Hannover Life Re
6 AMP – Flexible Super AMP Life AMP Life
7 AMP CustomSuper AMP Life AMP Life
8 AMP Flexible Lifetime – Super Easy AMP Life AMP Life
9 AMP Flexible Lifetime Super AMP Life AMP Life
10 AMP SignatureSuper AMP Life AMP Life
11 AMP SuperLeader AMP Life AMP Life
12 ANZ Super Advantage ING Life ING Life
13 Aon Master Trust – Personal Division AIA Australia AIA Australia
14 Aon Master Trust – Standard Solution AIA Australia AIA Australia
15 Asgard Elements Super AIA Australia AIA Australia
16 Asgard Employee Super AIA Australia AIA Australia
17 Asgard eWRAP Super AIA Australia AIA Australia
18 Asset Super MLC Life MLC Life
19 AUSCOAL Superannuation Fund CommInsure n/a
20 Australian Meat Industry Superannuation Trust CommInsure CommInsure
21 AustralianSuper TOWER Australia TOWER Australia
22 AustSafe CommInsure CommInsure
23 AXA Generations – Personal Super AXA Australia AXA Australia
24 AXA Simple Super AXA Australia AXA Australia
25 AXA Summit – Personal Super AXA Australia AXA Australia
26 AXA Super Directions for Business AXA Australia AXA Australia
27 AXA Tailored Super AXA Australia AXA Australia
28 Bendigo Personal Superannuation Tower Australia Tower Australia
29 BT Business Super AIA Australia AIA Australia
30 BT Lifetime – Personal Super AIA Australia n/a
31 BT Lifetime Super – Employer Plan AIA Australia AIA Australia
32 BT Super for Life Westpac Life Westpac Life
33 BT SuperWrap Personal Super Plan Westpac Life Westpac Life
34 CareSuper CommInsure CommInsure
35 Catholic Superannuation Fund TOWER Australia TOWER Australia
36 Cbus Hannover Life Re Hannover Life Re
37 Christian Super Hannover Life Re CommInsure
38 Club Plus CommInsure CommInsure
39 Club Super MLC Life Australian Income Protection
40 Colonial First State FirstChoice Employer Super CommInsure CommInsure
41 Colonial First State FirstChoice Personal Super CommInsure CommInsure
42 Colonial First State FirstChoice Wholesale CommInsure CommInsurePersonal Super
43 CONNECT Superannuation Plan ING Life n/a
44 Energy Industries Superannuation Scheme TOWER Australia TOWER Australia– Accumulation Scheme
45 Equipsuper Hannover Life Re Hannover Life Re
46 Equity Super Freedom of Choice TOWER Australia TOWER Australia– Business Super
47 Equity Super Freedom of Choice Super TOWER Australia TOWER Australia
48 ESSSuper Accumulation Plan CommInsure CommInsure
49 First State Super MetLife ACE Insurance
50 FIRST Super ING Life ING Life
51 FSP Super Fund ING Life ING Life
52 FuturePlus Super TOWER Australia TOWER Australia
53 Government Employees Superannuation AIA Australia AIA AustraliaBoard – GESB Super
54 GuildSuper AIA Australia AIA Australia
55 Health Super AIA Australia AIA Australia
56 HESTA ING Life ING Life
57 HOSTPLUS ING Life ING Life
58 ING Corporate Super ING Life ING Life
59 ING Integra Super ING Life ING Life
60 ING OneAnswer Personal Super ING Life ING Life
61 Intrust Super Hannover Life Re Australian Income Protection
62 IOOF Portfolio Service Corporate TOWER Australia TOWER AustraliaSuperannuation
63 IOOF Portfolio Service Employer TOWER Australia TOWER AustraliaSuperannuation
64 IOOF Portfolio Service Personal TOWER Australia TOWER AustraliaSuperannuation
65 Legal Super ING Life ING Life
66 Local Government Superannuation Scheme TOWER Australia TOWER AustraliaAccumulation Scheme
67 LUCRF ING Life ING Life
68 Make A Choice Superannuation Master Trust ING Life ING Life
69 Media Super Hannover Life Re International Underwriting Service
70 Member’s Choice Superannuation Master Plan MLC Life MLC Life
71 Mentor Employer Superannuation Plan ING Life ING Life
72 Mercer SuperTrust AXA Australia AXA Australia
73 MLC Employer Super MLC Life MLC Life
74 MLC MasterKey Business Super MLC Life MLC Life
75 MLC MasterKey Custom Superannuation MLC Life MLC Life
76 MLC MasterKey Super & Pension MLC Life MLC Life
77 MLC MasterKey Super Fundamentals MLC Life MLC Life
78 MLC Navigator Access Super and Pension MLC Life MLC Life
79 MLC Navigator Retirement Plan MLC Life MLC Life
80 MTAA MetLife MetLife
81 Nationwide Superannuation Fund ING Life ING Life
82 netwealth Super Wrap AIA Australia AIA Australia
83 NGS CommInsure CommInsure
84 OAMPS Super Fund AXA Australia AXA Australia
85 Perpetual Select Superannuation Plan AIA Australia AIA Australia
86 Perpetual WealthFocus Super Plan AIA Australia AIA Australia
87 Plum Superannuation Fund MLC Life MLC Life
88 Prime Super MetLife MetLife
89 Pursuit Core Personal Superannuation TOWER Australia TOWER Australia
90 Pursuit Select Personal Superannuation TOWER Australia TOWER Australia
91 RecruitmentSuper – EasyChoice CommInsure n/a
92 RecruitmentSuper – SelectSuper CommInsure Lumley General Insurance
93 Rei MetLife MetLife
94 REST AIA Australia AIA Australia
95 Russell SuperSolution Master Trust TOWER Australia n/a
96 Spectrum Super TOWER Australia TOWER Australia
97 Statewide Superannuation Trust MetLife MetLife
98 Strategy Retirement Fund ING Life ING Life
99 Suncorp WealthSmart Business Super Asteron Life Asteron Life
100 Suncorp WealthSmart Personal Super Asteron Life Asteron Life
101 Sunsuper Suncorp Life Suncorp Life
102 Tasplan CommInsure CommInsure
103 Taxi Industry Superannuation Fund ING Life n/a
104 Telstra Super – Personal Plus TOWER Australia TOWER Australia
105 TOWER The ARC Corporate Plan TOWER Australia TOWER Australia
106 TOWER The ARC Personal Plan TOWER Australia TOWER Australia
107 TWUSUPER CommInsure CommInsure
108 Unisuper Accumulation Super (1) Hannover Life Re Hannover Life Re
109 VicSuper Beneficiary Account AXA Australia AXA Australia
110 Vision Super CommInsure CommInsure
111 WA Local Government Super Solutions TOWER Australia TOWER Australia
112 Wealthpac Superannuation Service TOWER Australia TOWER AustraliaEmployer Division
113 Wealthtrac Superannuation Master Trust ING Life ING Life
114 Westscheme TOWER Australia TOWER Australia
Rank Product Default Death Default Salary and TPD Insurer Continuance Insurer
Rank Product Default Death Default Salary and TPD Insurer Continuance Insurer
Heron list of insurers October 2010
SUPERREVIEW * NOVEMBER 2010
16 SMSFs www.superreview.com.au
Self-managed superannua-tion funds (SMSFs) rep-resent the fastest-growing
segment of the industry, ac-counting for almost a third ofassets – suggesting to many thatthe time has come for the Gov-ernment and regulators to treatthem accordingly.
SMSFs can no longer becalled a cottage industry, andfor Sharyn Long, chair of theSelf-Managed SuperannuationFund Professionals’ Associationof Australia (SPAA), the devel-opments of 2010 have onlyserved to reinforce that fact.
“The last 12 months havebeen a period where we’ve beenparticularly active and I thinkour voice has been heard to anextent that it hasn’t previously,”she says. “Our representationand involvement with the Coop-er Review, our involvement inthe hand-down of the Henry Re-view and also of the FederalBudget, the fact that we wereable to influence the Minister[Chris Bowen, former Ministerfor Financial Services, Super-annuation and Corporate Law]and have an outcome as far asthe Minister’s final decisionon collectibles and the recom-mendations of Cooper.”
“All of these things demon-strate that the SPAA has a realand significant voice, as doesthe SMSF sector,” she adds.
Graeme Colley, technical man-ager of SMSF administrator Su-perConcepts, says that the Coop-er Review’s recognition of SMSFs
and the important role they nowplay in Australia’s wider super-annuation industry has been aparticularly dynamic change.
“Prior to that, people weretreating self-managed fund[trustees] as someone they did-n’t want to talk to,” he says. “Andobviously that should neverhave been the case. The realityis that they’ve been one third ofthe industry for a long, long timeand if you look at the stats thatare coming out from the ATO[Australian Taxation Office]that presence only seems tobe increasing.”
“At this point, the next keychange is largely dependent onwhether the Cooper Review willactually be implemented eitherin part or in full,” Colley con-tinues. “A lot of the changethat’s been flagged has to dowith competency standards andone of the criticisms comingfrom the bigger parts of the in-dustry have been that people inthe self-managed fund spaceare relatively incompetent be-cause things like RG146 (Reg-ulatory Guide 146) certainlydon’t require that you have ex-pertise or knowledge of SMSFsto go out and talk about them.So if that sort of change comesin and those criticisms are de-flected, that’s definitely anoth-er space to watch.”
Echoing Colley’s view regard-ing negative perceptions ofSMSFs from the ‘bigger end oftown’, Long says that for many in-dustry participants, SMSFs have
been considered a nuisance.“But I think that’s changed
now and Jeremy Cooper [Chairof the Super System Review] andthe Minister [Bill Shorten, Min-ister for Financial Services andSuperannuation] and everyonewho’s influential has basicallysaid that while SMSFs are notthere for everyone, they are avalid part of the sector and theydo suit a certain demographic ofpeople who want to have con-trol,” she says. “There’s alwaysgoing to be further to go whenit comes to increasing the profileof SMSFs but one of the funda-mental things we see in super-annuation is constant change.”
“It undermines credibilityand people become nervous asa consequence. The one thingthat people say to me mostoften is ‘Well, that’s all well andgood now but what will be therules when I do retire?’ and ‘If Iput my money in now, is it stillgoing to be tax free in 10 yearstime when I’m ready to retire?’”continues Long. “So stability
and consistency is key here. Weall acknowledge that there’s stillsome way to go in terms of theCooper recommendations thathaven’t been endorsed or thosethat the Government hasn’tcommented on and we’ve stillgot the Financial Service Re-form happening as well.”
“So there’s no doubt that westill have a way to go but whatwe’re saying is that things aren’tbroken, we’re tweaking theedges a little here and there butwe do need to restore consumerconfidence right across the sec-tor,” she adds.
Indeed, given the significantstrides made by the self-managedsector of the super industry tothis point, one of the more in-teresting questions to be posedis whether they are now a con-cern for industry and retail fundtrustees. To date, their growthhas not slowed meaningfully atany point and according to JohnMcIlroy, CEO of Multiport, theirattraction to superannuants hasbeen a concern for mainstream
funds for some time.“Certainly for the retail sector,
when you look at the moneythat’s going out of retail-basedfunds and wraps, significantparts of that are going intoSMSFs,” he says. “Some institu-tions actually identified it a whileago and have looked to put offersor arrangements in place so thatthey don’t necessarily completelylose the money.”
“In our own situation, beinga subsidiary of AXA since themiddle of last year, they identi-fied three or four years ago thatthey wanted to be a player in thismarket and that was not only be-cause they thought it was goingto be an area of growth, but be-cause they were losing money tothe sector,” McIlroy continues.“And I think it’s a similar story formost institutions. You’ve nowseen companies like SuperCon-cepts becoming part of ANZ, Mul-tiport being a part of AXA, Per-petual owning SmartSuper, soyou’ve seen evidence of it oc-curring already. So from retail
The findings of the Cooper Review have
given self-managed superannuation
funds increased legitimacy but, as
DAMON TAYLOR writes, people are still
questioning the way SMSFs are being
treated for regulatory purposes.
Finding the balance for
SMSFswww.superreview.com.au SMSFs 17
NOVEMBER 2010 * SUPERREVIEW
funds’ point of view, it’s obvi-ously a pretty significant issue forthem and I’m sure we’ll see moreorganisations do things in thisarea.”
For Long, the reality of an in-creasingly competitive marketmeans that retaining membershas to be a core concern for allfunds.
“And my personal view is thatSMSFs possibly have a lot to gainfrom the MySuper product,” shesays. “Its still to be decided whatfinal form that will take but myunderstanding of how its pro-posed right now is that everyAPRA-regulated [Australian Pru-dential Regulation Authority]fund in Australia is going to haveto offer a MySuper product whichis going to be a low-cost, no bellsand whistles type of productwhich will suit the 60 to 70 percent of members who are dis-engaged.”
“The 30 or 40 per cent ofmembership that are engaged,those who want the more so-phisticated products and who
want better insurance optionsand more investment choice willpotentially incur a larger cost tohave those products within alarger fund that’s offering a verylow cost product to the majorityof members,” Long adds. “So inactual fact, those funds may bedisadvantaged when that My-Super product comes in becausethey may not get the economiesof scale that they need to be ableto provide the more sophisti-cated products, those productswith more bells and whistles forthose members who want them.”
According to Long, a likely re-sponse from those memberswith higher account balancescould easily be looking to aSMSF as a better option.
“In a SMSF, they may be ableto achieve what they’re lookingfor at a lower cost than whatthey would pay if they remainedwith an industry or retail fund,”she says. “Time will tell on this.We still have some detail to playout on how MySuper will ac-tually look but if it goes aheadas it has been suggested, then Ithink if you can’t get that in oneof those not-for-profit or retailfunds at a reasonable cost thenyou are going to look for alter-natives and SMSFs offer a vi-able alternative.”
Naturally, all is not entirelyrosy for SMSFs. Despite theprogress that the sector hasmade in recent times, there areproblem areas yet to be coveredand for McIlroy, chief amongthem is compliance.
“There are a lot of funds outthere that are run very well butthere’s also a lot of funds thataren’t run terribly well andthere is certainly room for gen-eral improvement,” he says.“The question is how do youmake them improve. Obviouslythe ATO has increased their re-sources in the audit area butif they were to increase their re-sources a bit more, then thatmight improve things a bit.”
“Unlike ASIC [the AustralianSecurities and Investment Com-mission], the ATO also doesn’tseem to publicise it too muchwhen it penalises people forbreaches so perhaps there’s notenough acknowledgement thatif people do breach the rules,then there’s a serious conse-quence,” McIlroy continues. “Forinstance, there was a case justrecently where the ATO fined atrustee $55,000 and they were on12 months of periodic detention.”
“Now if they publicised itwhen they are imposing moresignificant penalties, then itmight make a few people takea bit more notice.”
Alternatively, while Colleyagrees that raising compliancestandards is still a challenge forthe SMSF sector, he says thatincreasing the publicity of non-compliance as a deterrent is notalways possible.
“In the super industry’s cur-rent form, you’ve got APRA look-ing at the larger superannua-tion funds in that prudential
way, looking at systems and theway in which the processes op-erate whereas with SMSFs, theATO looks at the sector at amore micro level because that’swhere the compliance issuesare,” he says. “I know that[deputy Commissioner of theATO] Niel Olesen, in one of hisrecent speeches, did mentionthere were a number of issues
that are still coming up and oneof his concerns is just the lodge-ment of returns because whileit’s improved, he still isn’t ab-solutely happy with the per-centage of returns that werebeing lodged for self-managedfunds.”
“In terms of publicising non-compliance, the Commissioneris bound by secrecy provisions,”Colley continues. “That’s the dif-ficulty here because eventhough he may wish to publicisethe reasons for some of thepenalties that are being im-posed, its only when things getto court that it becomes pub-lic information.”
“Improvement here has to bea gradual process. The Com-missioner already highlightsthose compliance areas he’smost concerned with as a gen-eral rule, so things like non-lodgement and borrowing, andthey’re the things that need im-provement but I think general-ly the regulators see that theSMSF area has made significantprogress.”
Yet beyond compliance, oneof the more common argumentsaround SMSFs, and one the sec-tor cannot seem to shake, re-lates to minimum account bal-ances. The argument hasalways been that an accountbalance of $200,000 or less is in-sufficient to take full toll of theadvantages that SMSFs boasthowever, according to McIlroy,the question really comes backto cost.
“I actually used to be an ad-viser and my recommendedentry point was probably a bithigher than $200,000, not somuch because it might not beeconomical but because ifyou’re trying to get diversitythrough a SMSF, you’ve got tohave a reasonable amount ofmoney in there,” he says. “Butif you used an example of$150,000, if I’m in a retail fundI’m probably paying around
about 1.5 per cent so can I dothat inside a SMSF? If the planis to have 10 shares, a cash ac-count, maybe a couple of man-aged funds, then the answeris yes, I probably can get it ad-ministered for similar amountsof money.”
“I think it comes down tocomparing the cost of whereyou are now and then, if youmoved to self-managed, how areyou going to invest it,” addsMcIlroy. “If I was investing it allback through a wrap account,then economically it doesn’tmake sense but if you’ve got adirect investment portfoliowhere I’m not incurring a sec-ond lot of administration fees,then it can be okay.”
McIlroy says that while thesale of SMSFs to people forwhom they aren’t appropriateis always a possibility, he wouldnever be in favour of a mandat-ed minimum account balance.
“In many ways, imposingsome sort of minimum accountbalance barrier would be im-possible because you could bestarting off with $100,000 butthen intend to pump it up withcontributions,” he says. “Pro-viding that the regulations en-sure that there is adequate dis-closure of what the costs are,then there’s no problem here.”
“It really comes back to thedisclosure aspect of it and mak-ing sure potential SMSFtrustees understand exactlywhat the costs are.”
Colley says that if a superan-nuant is going into an SMSF froma cost point of view, then between$150,000 and $200,000 is aroundabout the break-even point.
“Now often people in the ini-tial years won’t have $150,000or $200,000 that will go intosuper but over a reasonablenumber of years, if they con-tribute full amounts, you wouldhope that they get up around
Continued on page 18 ☞
Graeme Colley
those levels,” he says. “So if costis the sole issue, it might beworth putting your money intoanother fund and then rollingit over into a SMSF later downthe track.
“And if that’s not the issue,you’ve just got to be preparedthat in the earlier years thatit may be relatively expensiveto put your money into theSMSF,” Colley continues. “WhatI would point out though is thatyou don’t see other superannu-ation funds saying that from acost point of view, there areother funds that are cheaperthan the fund you’re in now.That’s something that’s cer-tainly not being said at the larg-er end of town.”
Pointing out that JeremyCooper as well as current andformer Ministers for FinancialServices and Superannuationhave all said that they aren’tgoing to stipulate a minimumaccount balance for SMSFs,Long says that provided trusteesare getting sound advice aboutthe establishment, they shouldunderstand the consequencesof what they’re doing and thecosts associated with it.
“It’s true that the majority ofcosts associated with SMSFs arefixed costs so therefore the lowerthe account balance, the moreyou’re going to pay as a percent-age of your assets,” she says.“However, trustees should be so-phisticated enough to know thatand advisers should be point-ing that out very clearly to clientsbefore they establish SMSFs.”
“People think we need tomandate a minimum accountbalance because quite oftenSMSFs are started and thenrollovers come in and they taketime or they’re established witha view to putting in retirementassets and so on,” Long con-tinues. “There could be anynumber of reasons for estab-lishment and any number of
reasons why you may have quitea small account balance on dayone, but the bottom line is thatthere’s a lot of complexityaround how you administer aminimum account balance tostart with. My view is that theway to deal with that is ensurethat advisers are providing theright advice and that trusteesare fully informed before theyestablish.”
“It’s obviously something thatthe wider industry has pickedup on and it’s something thatSMSFs have received criticismfor, but the vast majority offunds actually have muchstronger account balances thananywhere near the minimumthat’s being suggested.”
Of course, as with all sectorsof superannuation, waiting in thewings for Australia’s SMSFs is thepotential change that may resultfrom Jeremy Cooper’s Super Sys-tem Review. Yet with respect tothe SMSF changes that seemlikely, Long suggests that the pro-posed removal of the account-ants’ licensing exemption has al-ready taken much of the focus.
“The accountants’ exemptionwill be a big factor in the comingperiod in terms of how that playsout,” she says. “The recommen-dations are that it will go, butwhat form of licensing will be re-quired for accountants is stillsubject to industry consultation.”
“The majority of people whoestablish a SMSF see their ac-countant in the first instance,
and under the accountant’s ex-emption, an accountant can as-sist a client in establishing anSMSF,” Long continues. “If thatexemption is removed then anaccounting practice will need tohave a licence in order to be ableto provide advice on establishinga SMSF, whereas at the moment,an accountant can’t provide ad-vice on other sectors unless theyhold the appropriate licence.”
Long says that as thingsstand, the accountant’s ex-emption has limitations in thatthey can only provide advice onone particular sector: SMSFs.
“They can’t provide it acrossthe board; they can’t provide ad-vice and compare products,”she says. “So obviously there arelimitations in the current modeland it needs to be changed, butwhether we will go to full li-censing which I think is whathas been suggested, that has yetto play out but certainly has thepotential to change the way weoperate currently.”
Focusing not just on the re-moval of the accountants’ li-censing exemption but also onthe combined effect of proposedchanges, McIlroy says that heanticipates the changes will im-pact SMSF service providersrather than trustees.
“If you combine a couple of
things together, one being thepotential removal of the ac-countants’ exemption, second-ly the registration of auditorsand additional requirements formore education, and then ad-ditional requirements on li-censed advisers giving advice inthis area and having specific ed-ucation in SMSFs,” he says. “Ifyou put all of those things to-gether, then given the thou-sands of service providers inthis area we believe there willbe a rationalisation in the num-ber of service providers.”
“I think the stats are that overhalf of accountants have 30 orfewer funds as clients and re-alistically, for a lot of them,that’s not really an economicnumber of funds to get regis-tered, do training, do all of thosesorts of things,” McIlroy con-tinues. “So the demands on thepractices for registration, addi-tional education, whatever, maypush some of them to say thatthey can’t be bothered anymore.You might see them outsourc-ing work, potentially doing jointventures with financial plan-ners or instead of doing theaudit work themselves, farmingit out to specialist auditors.”
“We can see quite a bit of ra-tionalisation happening whichwill probably compress the
number of service providersin the industry and mean thatthose remaining will be trulyspecialised.”
Yet irrespective of the changethat may come from the Coop-er Review and the areas of im-provement that remain forSMSFs, the fact remains thatthis is a sector of superannua-tion that has earned its growinglegitimacy and for Long, con-tinued growth is inevitable.
“But the lifting of standards inprofessional advice for all serv-ice providers to the sector is crit-ical,” she says. “Maintaining thestatus quo and not changing forchange’s sake is also vital. We re-ally need bipartisan support onsuperannuation and we needto stop fiddling with it.”
“If you’re in your 40s now andyou’re not going to retire for20 or 25 years, you want to knowthat the rules you invest underor accumulate your savingsunder are going to be the sameas the rules you retire under,”Long continues. “And that does-n’t only affect SMSFs, it’s justthat because SMSF trustees aremore engaged, they tend to bemuch more concerned aboutsuch issues.”
“But certainly, stabilising cur-rent legislation is going to befundamental to the strengthof this sector.”
According to Colley, thoughthe sector has its fair share ofchallenges, it is tracking well.
“When you hear JeremyCooper say that SMSFs couldbe the fund of choice in 20 or 30years time, that certainly seemsto give it a fairly bright future,”he says. “And if we see an im-provement in the competencyon both the adviser and ad-ministrator side of things, thenhopefully that will flow throughto members and trustees.”
“If that happens and we con-tinue to see strong retirementoutcomes then at the end of theday, I don’t think you can com-plain about SMSFs.” SR
SUPERREVIEW * NOVEMBER 2010
18 SMSFs www.superreview.com.au
☞ Continued from page 17
Sharyn Long
Finding the balance for SMSFs
SUPERREVIEW * NOVEMBER 2010
20 INSURANCE www.superreview.com.au
Consolidation of mandatesand services deliveryemerged as the key focus
for most insurers through 2010.With the challenges of the
global financial crisis behindthem and with an acknowledgedunderinsurance gap as a back-drop, insurance providers havehad the opportunity to consol-idate their services as a key dif-ferentiator for those funds seek-ing a competitive advantage.According to the chief executiveofficer of MetLife InsuranceAustralia Marc Lieberman, mostinsurers have grasped that op-portunity firmly.
“From a MetLife perspective,I think our focus for the last12 months has been really re-inforcing our technology andservice capabilities,” he said.“I’m a firm believer that serviceis going to be a differentiatorinto the future and firms likeours need to do everything wecan to provide top-notch serv-ice and technology so that superfunds have the ability to providebetter information, easier pro-cessing, easier access for theirmembers and an overall bet-ter experience. So that’s been abig focus for us.”
“As far as the super indus-try itself goes, I think there’sbeen some of that but I thinkthere’s also been a lot of focuson the potential consolidationand deals that have been in thepress over the last six to 12months and that’s probablybeen a bit of a distraction,”Lieberman continued. “We’renot involved in any of that soit has actually been quite goodfor us because it gives us clear
focus and the ability to reallyconcentrate on what we needto, which is making sure ourtechnology and service offeringis as solid as it can be.”
Acknowledging that the in-surance being provided bysuper funds had become an im-portant differentiator, head ofgroup life for Tower AustraliaAndrew Boldeman identifiedthree areas of focus.
“At the moment, we’re seeinga very heavy focus on insuranceand a faster pace of activity asfunds increasingly look to useinsurance to differentiate them-selves from each other,” he said.“I’d really call out three mainareas of focus, one being theproducts side so updating morefrequently and a faster paceof change.”
“Communications is anotherone. We’re seeing a lot of funds[that] have grappled with howto make insurance as easy aspossible to understand for theirmembers, so easier to under-stand communications, makingthe nature of the benefits thatmembers have easier to under-stand and also making it easi-er for members to execute onchanges,” Boldeman continued.“Then third on the list is servicebecause it’s attracting a lot of at-tention from a fund perspective.”
“So that means looking to de-liver that member service ex-perience and improving thatservice and really consideringwhat’s the best way of doingthings, what are the right av-enues and really looking atbroader ranges of communi-cation and greater use of tech-nology,” Boldeman added.
In general, Lieberman saidthat it was clear that superfunds were taking a long hardlook at the insurance offer-ings being provided to theirmembers.
“They’re re-evaluating themin terms of whether they’re ap-propriate and whether they’reproviding the right levels ofservice,” he said. “I think there’sa general understanding andacceptance that Australians areunderinsured, that doesn’t seemto be debated by anyone, andthat where insurance is held bymost Australians is throughtheir super fund.”
“Super funds are taking anincreased level of responsibili-ty in ensuring that they’re pro-viding enough and making surethat it’s at a sufficient level,knowing that it may be the onlyinsurance that a member has,”Lieberman added. “And that’scertainly a positive.”
“Underinsurance is a bigproblem and anything these in-dustries, both the insurance in-dustry and the super industry,can do to help rectify that isto the benefit of everyone.”
Undoubtedly service is top-of-mind for both insurers andsuper fund trustees. Yet theconstant battle within the in-surance space is balancingwhat insurers refer to as ‘thewhole insurance package’against an unavoidable bottomline in price per unit of cover– and according to Lieberman,it is one insurers had to beaware of.
“Obviously funds are alwaysgoing to have to decide howmuch they can afford to pay per
member for insurance coverageand then they’ve got to decidehow they’re going to split thatup amongst various benefits,”Lieberman said. “Ultimately itreally does come down to dol-lars per unit cover.”
“However, I will also say thatwhat I’ve seen in the past sixmonths being in Australia is abit of price compression whichis to the benefit of the superfunds,” added Lieberman. “So Ithink they’re getting more cov-erage for a lower price than theywere two or three years ago andthat translates directly to thebenefit of the member.”
Altering the perspectiveslightly, general manager ofwholesale life at CommInsureClaire Roberts said that the key
driver for premium levels wasmember affordability.
“The primary purpose forsuper is to provide for the mem-ber at retirement,” she said. “Sothe proportion of a member’saccount balance that can be di-verted to fund efficient and low-cost life insurance is a matterthat the funds trustees takevery seriously.”
“In addition to this is thecompetitive nature of the in-surance industry that has, in re-cent years, resulted in down-ward pressure for insurancepremiums,” continued Roberts.“Most forms of insurance followa cyclical pricing pattern andwe expect this downward pres-sure to moderate to a realisticand sustainable level.”
Service delivery has become the focus for the big insurers
servicing the Australian superannuation industry and, as
DAMON TAYLOR writes, product support and claims
handling have become important differentiators.
Delivering on the promises
www.superreview.com.au INSURANCE 21
NOVEMBER 2010 * SUPERREVIEW
Roberts said that productdesign was also a key driverof premium with funds fo-cused on ensuring that theirmembers had appropriatecover and that it was easy toaccess with no or minimalunderwriting.
“And that has resulted in ageneral move toward higher au-tomatic acceptance levels[AALs], more suitable levels ofcover for younger and oldermembers and life event triggersthat provide access to increasedcover for members when theyneed it.”
“So the likely future trendis toward simpler, easier-to-un-derstand product designs.”
Lieberman said that when itcame to cost and value for
money, though they would al-ways be key factors in the pro-vision of superannuation-basedinsurance, trustees were look-ing for much more than a lowprice point.
“I can only speak for our cus-tomers but I know that we workvery closely with them to tryto keep service levels high, costslow and we try to find ways toenhance the experience,” hesaid. “So shorter turnaroundtimes for underwriting, shorterturnaround times for claimsmanagement, reduced pricesoverall – things like that.”
“And I’d guess our competi-tors are doing the same thing; Iwould certainly hope they are,”Lieberman continued. “Thereis a general sharper pencil outthere on both sides trying tomake sure things are betterthan they have been and that’skind of a philosophy that wehave. I’ve had that conversationwith several of our clients andthey say: ‘Well, what’s differ-ent now as compared to threeyears ago?’”
“And my response is that Ihope what they’re receiving nowfrom MetLife is better thanwhat they were receiving threeyears ago both from a serviceand a price standpoint.”
Not surprisingly, Liebermansaid that he also hoped that twoand three years into the future,the benefits, price and servicebeing received by MetLifeclients would again be betterthan what they were receivingtoday.
“And that’s simply becauseour philosophy is one of con-tinuous improvement,” hesaid. “We can’t afford toplateau because we’ve got toconstantly get better and ifwe’re not, I expect our clientsto give us a wake-up call andsay ‘listen, what have you donefor me lately?’”
Similarly, Boldeman said thatwhile the price of insurance
cover would always attract a lotof attention, the interactions be-tween a fund and its insurer hadbecome just as important.
“Price or the benefit terms oreven the specific product termsthat are provided are alwaysgoing to be one aspect; that’swhat always attracts a lot of at-tention as funds consider theirinsurance,” he said. “But I thinkthat of as much importance, ifnot of even more importance, isfunds considering how they in-teract with their insurer, howthey’re going to interact witheach other on an ongoing basis,how they share ideas, the ef-fectiveness of the two partiesactually working together to de-liver quality solutions to theirmembers.”
“Many funds have increas-ingly found that while price isimportant, they also need towork with these people and sothe relationship needs to allowcommunication and get solu-tions,” Boldeman continued.“And to me, that’s very muchwhat people are talking aboutwhen they talk about that‘whole insurance package’.”
Asked how conscious fundswere that insurance was aboutmuch more than price, Bolde-man said that the evidence cer-tainly suggested as much.
“That’s definitely what I’mseeing,” he said. “Increasinglythis is the major decision inplacement, those other serv-ices that go well beyond priceper unit of cover.”
“It’s easy to compare price andthat’s always going to be a verymajor driver behind funds’ deci-sions but I’m definitely seeingthis increased focus on the otherparts of the proposition,” Bolde-man continued. “But for sometime now, the industry has beenon a path of improvement interms of the way all insurers areinteracting with their funds.”
“They’re doing so with agreater degree of flexibility and
a greater degree of personalservice.”
Aside from price and servicehowever, recent years have alsoseen the use of insurance-basedtechnology increase exponen-tially. From data analytics to on-line calculators to claims man-agement, the role of technologyis vital and, according to Lieber-man, one that can be a differ-entiator in and of itself.
“On the group side, we’vedone a tremendous amount ofwork over the last 18 months indeveloping e-technology, e-ap-plication, e-lodgement, and e-claims is being rolled out as Ispeak,” he said. “We recognisedquite a while ago that enablingmembers and the super fundadministrators to access our
systems online, be able to pro-vide information and query on-line was going to be critical.”
“We consider it table stakesreally, we don’t even consider itan enhancement,” continuedLieberman. “It may be thatwe’re one of the few offering itright now in an active and liveway for our clients but I wouldexpect everyone should bedown the road and we’ll con-tinue to work to enhance andmake it as easy as possible.”
“Again, that has been a hugearea of focus but what I hope isthat it allows members to havebetter access, understand whatthey have better and therefore
be able to make more informeddecisions.”
Roberts said that compared toother sectors, the life insuranceindustry had been relatively slowto embrace technology.
“That has begun to change andfor wholesale insurance in par-ticular, increased competition inthe superannuation industry hashighlighted a range of opportu-nities,” she said. “Superannua-tion funds, most notably indus-try funds, have endeavoured todeliver greater services and im-proved customer experience totheir members and insurers haveresponded with a range of tech-nology innovations.”
Citing a number of techno-logical developments that hadoccurred within the insuranceindustry, Roberts said that thefirst and most prominent hadbeen enabling fund membersto apply for additional insur-ance online.
“That’s also coincided withimprovements to product de-sign such as higher AALs forcover without the need for un-derwriting,” she said. “Thoughcoupled with relatively low lev-els of online member activity,member take-up for this capa-bility appears to be low.”
“Claims notification and track-ing is another key area of op-portunity,” continued Roberts.“CommInsure were first to mar-ket enabling administrators toupload claims informationthrough an online portal and totrack claims status to reducecycle times and make it easierfor administrators.”
“CommInsure is also proudto announce another marketfirst for wholesale insurancewith SMS status updates directto the claimant for income pro-tection claims.”
Reflecting on the fact thattechnology within superan-nuation-based insurance was
Continued on page 22 ☞
Andrew Boldeman
SUPERREVIEW * NOVEMBER 2010
22 INSURANCE www.superreview.com.au
primarily about informing andenabling members, Liebermansaid that it was gratifying tohave seen relatively significantprogress.
“One of the toughest thingsabout this business is that veryoften the only time a memberwill even look at what their ben-efits are is if they have a situationhappen where they need to lodgea claim,” he said. “And that’s re-ally not the right time to exam-ine what your benefits are.”
“So the more we can do tomake the information easier toaccess, easier to understandand more readily available tothe member is only going to bet-ter the situation.”
Of course the one inescapableissue when discussing insuranceand its provision within the superindustry is underinsurance. Butas an issue identified some yearsago and one that insurers areacutely aware of, Boldeman saidthat both the insurance andsuper industries had made sig-nificant strides.
“I think progress has defi-nitely been made and in termsof action, I see it being made intwo ways,” he said. “One is bymaking it easier for membersto exercise choice and under-stand choices to increase coveron a voluntary basis; and alsofrom a default perspective, bymaking sure that the defaultlevels of cover for those who arerelying on their trustees and notmaking an actual choice, onmaking sure that those defaultlevels are appropriate.”
“I’d say on both counts we’veseen significant progress overthe last few years,” continuedBoldeman. “We’ve seen a num-ber of high profile funds actu-ally increase default levels ofcover, they’ve thought throughthe affordability of that cover byresearching members and un-derstanding that members are
actually happy paying for a high-er degree of insurance coverand they’ve responded to that.That is genuine progress.”
Espousing a very differentview, Lieberman said that whenall was said and done, progressin terms of bridging an ac-knowledged underinsurancegap had been minimal.
“I don’t think we’ve come farat all, quite frankly,” he said.“I don’t think we’re doingenough as an industry and Idon’t think the Government’sdoing enough in terms of edu-cating people and I think that’sreally the only way you can at-tack it.”
“You’ve got to get people tounderstand the purpose of in-surance, why it’s being offered,why they need it,” continuedLieberman. “It’s not a lotteryticket, it’s an income protectionvehicle should the income ofa loved one or a partner be di-minished or made to go awaycompletely in the case of death.”
“So it’s really through educa-tion – and other than isolatedincidents, I don’t think we as anindustry or as a country havedone very well at it.”
Yet the reality, according toLieberman, is that Australia isnot unique in that respect.
“That’s the problem and Ithink that’s where, if the indus-try can work with the Govern-ment most effectively, it shouldbe around education,” he said.“The focus has to be really get-ting people to understand whatinsurance is for, why they have itand why they should pay atten-tion to how much they have andhow much they need. There’s noother way.”
Asked whether there was anyyardstick that the super and in-surance industries could use togauge their progress in bridgingAustralia’s underinsurance gap,Boldeman said that the unfor-tunate reality was that doing sowould always prove difficult.
“It’s a good question andthere’s no one right answer un-fortunately,” he said. “The real-ity of all of this is that none ofus wants to be in the situationwhere we need to call on themoney and in a situation whereyou’re leaving dependants be-hind or you’re disabled.”
“Obviously, it’s always bet-ter to have more money ratherthan less but I think the con-straint in many cases is ac-tually just affordability,” con-tinued Boldeman. “Funds haveto manage to that broader in-surance need but also ensurethat insurance premiumsaren’t a drain on their mem-bers’ long-term retirementbenefits either.”
“They’re probably the keypoints to consider in terms ofwhen enough’s enough but, atthis stage, just looking at av-erage salary and an event inwhich someone at age 30 isdisabled and can’t work foranother 35 years, the majori-ty of Australians would real-ly be in a significantly lessfavourable position than theymight imagine.”
So with underinsurance and
an increasingly competitive su-perannuation industry framingall activity for group insurers,what then are insurers’ focuses?
For Tower, Boldeman saidthat the road ahead would beabout enhancement.
“For us specifically, we’ll becontinuing to build our capa-bilities to support our clients,”he said. “So enhancing oursupport team, enhancing ourproducts and differentiatingservice.”
“We’ll be continuing to investheavily in technology, so notas much bring new technolo-gy solutions to bear but just en-hancing current ones and mak-ing it easier for members toexecute and interact and en-gage with our funds.”
On the MetLife side of thefence, Lieberman said that thefocus was expansion.
“We’re looking at expandingour business,” he said. “To becompletely honest, when I cameto Australia it was with the in-tent of turning MetLife into oneof the top group insuranceproviders to superannuation inAustralia in the next few years.”
“I think that when you lookat MetLife’s strength as a glob-al brand, and our pending ac-quisition of Alico (which willclose in a couple of weeks),we’re already the largest in-surance company in Ameri-ca and we’re soon to be one ofthe largest in the world,”Lieberman continued. “Weneed to let Australian superfunds know that we’re hereand that we’re here to stay andthat we do have that strengthand expertise behind us.”
“We’re firm believers in thevalue of insurance, and whenyou see that people don’t havethe coverage that they needand you know the difficultiesthat can cause should atragedy happen, it almost be-comes a mission to figure outa way to rectify it.” SR
☞ Continued from page 21
We need to letAustralian superfunds know that
we’re here and thatwe’re here to stay
and that we do havethat strength and
expertise behind us.
RUSSELL Investments has an-nounced three new global appoint-ments in the alternative invest-ments space.
Egidio Robertiello has beenhired as managing director of al-ternative strategies focusing onhedge funds, Spephan Breban willperform the role of director of pri-vate equity, and Samuel Baughn hasbeen appointed as director of op-erational due diligence.
Based in Russell’s New York of-fice, Robertiello will be responsiblefor developing and implementingRussell’s hedge fund capabilities ona global scale.
As director of private equity, Lon-don-based Breban will head furtherdevelopment of Russell’s privateequity advice, while Baugn willlead its operational due diligencefunction.
FUND manager PIMCO Australiahas announced the appointment ofMichael Dale as investment spe-cialist as the company looks to ex-pand its retail presence in the Aus-tralian market.
Dale will replace Matthew McLe-naghan, who has been appointed toa role within PIMCO’s institution-al business as consultant relationsmanager.
Dale will work with Peter Dor-rian, head of global wealth man-agement, and will target the ex-pansion of PIMCO’s presence in theretail platform and wrap markets.Prior to joining PIMCO, he was atreasury dealer working in thefixed interest/money market salesteam at Suncorp Metway.
COLONIAL First State GlobalAsset Management (CFSGAM)has recruited Oliver Ansted as asenior analyst/portfolio managerin the equities growth team, bring-ing the total headcount to 18 in-vestment professionals.
With 15 years of experience, Anst-ed joins CFSGAM from Concord,where he was a buy-side senior an-alyst for the past four years, cov-ering a number of sectors. Prior toConcord, he was at Ord Minnett fornine years as a Sydney-based sell-side analyst.
Ansted will commence his role inOctober, covering gaming, insuranceand diversified financials.
FIONA Balfour has joined TowerAustralia as an independent non-executive director to the board, ef-fective immediately.
Balfour is presently on the boardof the publicly listed companySalmat and was recently appointed
to the board of Metcash.The chairman of Tower Australia
Group, Rob Thomas, announced herappointment and said Balfourbrought to the board additional ex-pertise in fields that were highly rel-evant to the company.
“Fiona Balfour has more than 30years executive experience acrossa wide range of businesses includ-ing financial services, health ad-ministration, aviation, informationand telecommunication services,education as well as a range of not-for-profit organisations,” Thomassaid.
Her previous experience includesperforming senior executive roles forthe Link Group, Medibank Private,Telstra Corporation and QantasAirways.
The Self-Managed Super Fund Pro-fessionals’ Association of Aus-tralia (SPAA) has appointed PeterCrump and Andrew Hamilton to itsboard.
The new appointments will re-place Stephen Bourke, who left lastyear, and Peter Burgess, whostepped down from his role on theboard to take up a full-time role asSPAA’s technical director.
Peter Crump is an executive di-rector at Portfolio Planning So-lutions where he is responsible forproviding financial planning adviceto SMSFs. Andrew Hamilton is themanaging director of Cavendish Su-perannuation, having previouslyworked across product design, soft-ware development and training pro-gram sectors, among others.
“The addition of Peter Crump andAndrew Hamilton to the SPAA boardwill provide valuable input to SPAApolicy efforts, which will benefitboth members and the SMSF in-dustry,” said SPAA chief executiveAndrea Slattery. SR
www.superreview.com.au APPOINTMENTS 23
NOVEMBER 2010 * SUPERREVIEW
Super Review’s monthly diary of superannuation industry events aroundAustralia and abroad.
NOVEMBER
NEW SOUTH WALES
5 – FSC Industry Briefing. Irish Funds –Opportunities for Australian Fund Managers.Speaker: Gary Palmer, chief executive of theIrish Funds Industry Association. Venue: TheKing Room. Level 24, 44 Market Street, Sydney.
SOUTH AUSTRALIA
10-12 – ASFA National Conference and SuperExpo. Spring into Action. Venue: AdelaideConvention Centre. North Terrace, Adelaide.Enquiries: ASFA Member Services Unit. Ph: (02) 9264 9300 or 1800 812 798.
Events Calendar
Fax details of conferences, seminars and courses to Super Review on (02) 9422 2822
MetLife Insurance has hired Peter Smith as the headof institutional distribution in Australia. Smith joinsthe company from Marsh Employee Benefits.
In his most recent role of national manager, Smith wasresponsible for group and retail solutions for Marsh
nationally.The chief marketing and distribution officer at
MetLife in Australia, Eric Reisenwitz, said Smithwill work towards achieving overall group insurancegrowth.
MetLife has also announced the appointment ofJonathan Kelly, currently business development man-ager, as head of institutional relationship management.Kelly will be responsible for the general developmentof customer relationship management capabilities, aswell as retention and growth strategies for MetLife’sexisting institutional customers. SR
MetLife appoints insto headUS-based Insurer MetLife hasmoved to boost its presence inthe super space.
Fiona Balfour
ROLLOVER T H E O T H E R S I D E O F S U P E R A N N U A T I O N
Double Billed
Got afunnystory? about people in the superannuation industry?
Send it to Super Review and youcould be raising a glass or two. Super Review is giving away a bottleof bubbly for the funniest story published in our next issue.
ROLLOVER sends his bestwishes to Richard Borysiewiczfollowing his departure aschief executive of AmundiAsset Management.
Amundi announced Bo-rysiewicz’s departure at thesame time as announcing thathis successor was formerState Streeter and Schrodersoperative Brian Scott.
As is the tradition with suchannouncements, Rollover re-ceived one or two emailsspeculating on the circum-stances of the changes atAmundi, but it is worth remembering the origins ofthe company: the merger of
the asset management armsof Credit Agricole and Soci-ete Generale.
Recent history suggeststhat any merger betweenasset managers results inchanges at the top.
Borysiewicz took up thereins as chief executive atCredit Agricole in 2007 afterhe had been sales and mar-keting director at Skandia.
Rollover reckons it sayssomething about the state ofthe financial services indus-try that the names CreditAgricole and Skandia are notpart of the Australian brandlexicon these days. SR
ROLLOVER is pleased to see that the newAssistant Treasurer and Minister for Finan-cial Services, Bill Shorten, will be openingthis year’s Association of SuperannuationFunds of Australia (ASFA) national con-ference in Adelaide this month.
However, in the competitive environmentthat exists between the organisations pur-porting to represent the financial services in-dustry, Shorten’s presence at the ASFA con-ference is not quite the coup it might at firstseem.
You see, the new minister will have spokenaround 10 days earlier at a Financial Ser-vices Council (FSC) luncheon in Sydney.
Rollover wonders whether it was a case ofthe FSC having better lobbyists or how thingsfitted in with the new minister’s very busydiary.
Whatever the case may be, both events are ex-pected to be very heavily attended in circum-stances where there has been plenty of specu-lation about the Government’s immediate policyintentions for the financial services industry andvery few genuine answers. SR
EACH year the Association ofSuperannuation Funds ofAustralia carefully guardsnews of the venue for its nextnational conference, thus en-abling a grand announcementto be made by the chairmanor the chief executive.
It should therefore gowithout saying that, eachyear, efforts are made bythose with not enough to doto find out the venue aheadof time.
Rollover does not wantto spoil anyone’s fun, buthe thinks Queensland issplendid albeit a littlehumid in November. SR
Partypooper
Life at the top
Stopping trafficRollover confesses to occa-sional bouts of car envy, par-ticularly when he sees su-perannuation fund executivesdriving cars that might beclassified as, well, just a bitupmarket.
He is never particularlysurprised to see fund man-agers driving around in carscarrying a prestigious Germanmarque, but he sometimeswonders whether superan-nuation fund executives areentirely reflecting their mem-bers’ best interests when they
are driving cars in a pricebracket over $60,000.
Being the churl that he is,Rollover decided to casuallyraise this moral issue with aparticular fund executivelast month and found him-self being put back in hisplace.
It transpires that the largeGerman-manufactured carhad been privately purchasedsecond-hand from one verycareful owner.
