Spaceship Part II: Will it take off?
In Part I we looked at what we might learn from Spaceship so far, particularly how it engaged and recruited hitherto disengaged astronauts.
Spaceship has engaged a target market, young professionals, that has traditionally presented super funds with some challenges, so this week we look at Spaceship’s prospects: will it take off?
Let’s define young professionals as workers aged 25 to 34 years old. There are around 3.5 million Australians in this age cohort, with an average super balance of $40k each. This is a problematic segment that is under-serviced by all parts of the market; balances of $40k are too small for retail funds to focus on, and these members are too young to fit into the pre-retirement member engagement activities of most industry funds.
But, as we’ve established previously, funds would do well to focus on the high net worth (HNW) segments of the future; after all, a 30-year old with $40k in super is likely to see their balance rising by >30% pa counting contributions plus investment returns.
Spaceship has seen the opportunity to focus precisely on this segment, and – even better – they have found a way to avoid the ‘economic challenges’ of profiting from lower-balance members… by charging really, really high fees! Against a backdrop of regulatory, competitive, intermediary and customer pressure to reduce price, Spaceship is charging $78 per annum per member, plus a whopping variable fee of 1.6%. It makes us wonder if this particular Spaceship is taking us back in time to 1995.
So, will Spaceship take off?
Probably. Even allowing for its low balance member base, by convincing members to pay $78 plus 1.6% per annum, Spaceship has developed an attractive commercial proposition. Indeed, almost anything would work at those fee levels. The question is: are there enough people who will pay up for super?
With 3.5m people between the ages of 25 and 34. Spaceship claims to have attracted ~20,000 members already (or just 0.6% of this cohort), suggesting it could be just the tip of the iceberg. Or, alternatively, they have already exhausted the fintech population to whom the proposition appeals. We’ll find out shortly, but the one thing we can be certain of is that with such high fees the incentive to find the next 20,000 members is very high.
Should incumbent super funds be worried? We think not. The direct opportunity is today very small and Spaceship will likely remain a niche player. And there’s still a decent chance that Spaceship is just the next BT TIME fund.
The real story here is that the industry has left the door wide open for a new entrant to convince customers to spend more on their super – just through deploying a unique engagement method. And that Spaceship has had initial success in engaging an otherwise unloved segment in super – future HNW members.
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