Autonomy offers a taste of control
The growing SMSF market, which accounts for almost half a million funds with $496.2 billion in assets under management, has concerned the mainstream superannuation funds - both retail and industry - for years.
Having seen members leave to start up their own self-managed super funds, many are now providing "member-directed options", through which members can choose to tailor a suite of shares, fixed-income investments or other listed investments.
These are not entirely new. Ten years ago, one of the predecessors of AustralianSuper, the Australian Retirement Fund, launched an option that enabled members to invest in the top 100 ASX-listed shares.
The $12 billion HOSTPLUS has also signalled that it will launch a member-directed option by the end of the year.
The company's executive manager of strategy and marketing, Umberto Mecchi, says: "It's for those who are probably seeking some increased control.
"Our demographics show we've got a large number of members who are young, but we also have a very wealthy cohort in the over-50s section ... We just want to make sure [we cater to them]. The SMSF [growth] has demonstrated there is some popularity about people wanting to take control."
Legalsuper has teamed up with Macquarie Bank to offer a direct-investment option, while many other funds, such as the $7 billion AUSCOAL, are also working on options.
Whether the extra flexibility will stop members leaving to start up SMSFs is unclear, but most funds that offer them believe they can't afford not to.
AUSCOAL chief executive Bruce Watson says although it has little leakage to SMSFs, it wants to give members more control if they choose it. "The more engaged our members get, the more control they want."
Sunsuper is one fund that doesn't believe its members are crying out for such an option just yet.
"We hold the view that it's not going to stop members from going to SMSFs," says Teifi Whatley, Sunsuper's general manager of customer experience and insights. "Our research with our members has not suggested that it's a key priority."
Perhaps HOSTPLUS sums it up best when it calls it "SMSF lite".
These self-directed options give members some choice - and definitely at a lower cost than a full-scale SMSF - but they don't provide the same level of investment flexibility. For example, you won't be able to invest in single-asset property or artworks. But if you are becoming more engaged and want to exercise some control over your retirement savings, the new options offer a good trial run.
If things don't work out, it's much easier to transfer your funds back into a prescribed investment option within the fund. And if, through a taste of autonomy, you realise that running a fund by yourself isn't as easy as it might appear, perhaps that's a good thing.
David Potts is on leave.