Retirement – industry funds’ weak spot. Or is it?
For all the growth, regulatory reform and hype about disruption, over the past 10 years (at the segment level) there has only been one meaningful shift: today’s infographic shows that retail funds have yielded market share to industry funds, whilst all other segments are basically flat. Even SMSFs, one of the most talked about growth trends, haven’t increased their market share much in the last ten years – their share today of around 29%, is within a rounding error of what it was in 2008.
Superannuation market-share shifts
Until recently, the retail segment has tended to view industry funds as great incubators of low-balance, disengaged members until the day they bloom into valuable clients for advice businesses. Ie the not-for-profit segment performs a valuable but untroubling role. And for the most part industry funds didn’t have a product, engagement or advice mechanism to cause any trouble. When members decided to engage with super, or wanted to retire, industry funds were defenceless.
And that is how we got where we are today. Retail has won members at (or near) retirement hands down; 36% of retail assets are in pension phase (vs just 12% in industry funds) thanks to retail’s army of advisers.
But that tells the story of where the industry has come from rather than where it is going.
If we look at the market share of pension members in large super funds (>$1bn in assets), it’s clear that industry funds are rapidly developing the ability to take care of their members’ retirement as well as accumulation phases. Today’s second infographic shows this trend unequivocally: just two years ago industry funds had only 9% share of pension members; that has grown to 13% today.
The share of pension assets is growing more slowly, as you would expect – but industry funds’ recent success in attracting (or, better said, retaining) pension members is an indication of what will be possible.
Pension members market share – retail vs industry funds
With rapidly evolving product offers, improvements in member engagement (including a huge ramp-up in digital spend), refreshed advice propositions (digital and human) and the potential for CIPR to give industry funds a strategic leg-up, there is absolutely potential for industry funds to continue their ascendance. But they shouldn’t expect the next stage of market share growth to be as easy; the stakes are significant and retail funds will defend with fervour. Expect to see similar levels of investment in this part of the market.
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