Corporate super now too lucrative to ignore
News that BHP offshoot OneSteel is to outsource its superannuation has sent rip-ples of excitement through the financial services industry.
News that BHP offshoot OneSteel is to outsource its superannuation has sent rip-ples of excitement through the financial services industry.
And this is not only for the 10 financial services groups vying for the $650 million in assets under management. In fact, Money Management understands that many of the contenders for the coveted prize are purely in the race for prestige. Appar-ently margins will be tight.
But what is really interesting about the deal for financial planners is the stipulation by BHP that the winning bid must be able to fulfil the financial planning needs of the fund’s 7,000 members.
This represents both a threat and an opportunity for financial planners. If you are a financial planner for one of the seven groups in the bidding who have planning subsidiaries, there is an obvious opportunity to take on responsibility for advising some of the very loyal and in some cases, high net worth, employees. The average account balance for the fund is $93,000.
The threat is for those who are not members of one of these groups. These advisers may be locked out of redundancy or retirement advice for the 7,000 employees for life.
However, at least three of the contenders do not currently have the internal capac-ity to supply financial planning on this scale. These groups are among a growing number of fund managers and industry funds seeking partnerships with external fi-nancial planning practices to service tenders such as that put up by OneSteel.
There is an opportunity for financial planning practices to form partnerships, either formal or informal, with this growing band of superannuation groups. This may mean a certain loss of independence but most dealer groups simply could not han-dle the administrative burden of managing a significant superannuation fund.
There is nothing new about the corporate superannuation market for financial ad-visers. Life insurance agents have been successfully exploiting the small business end of the market for more than 20 years. However, financial planners who do not come from a life agent background have generally been reluctant to expand into corporate superannuation, fearing the development costs will outweigh the long term benefits.
The real change now is the pace with which companies are looking to outsource their super funds. The OneSteel deal may be the biggest tender ever offered, but it may also be only the tip of the iceberg. And if choice of super legislation ever makes it through parliament, the pace of change will only increase.
The opportunity to expand into corporate superannuation opens up new markets for planners, including the increasingly important wealth accumulation market. Plan-ners can lock in loyalty to their business and provide potential buyers of their busi-ness with a sticky customer base.
The threat to financial planners is that if they fail to capitalise on the growth in the outsourcing of corporate superannuation, someone else will.
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