Corporate super out of the too hard basket

AM Corporation's general manager business development and adviser services, Graham Davison calls it "the biggest financial planning opportunity I have seen in 20 years."

BT/Principal's senior vice president, corporate investment services, Dan McGee says "There is no question at all that advisers can play and be successful in this market."

Matt Lawler, general manager, MLC Adviser Solutions says it gives planners, "Access to more dollars."

It is, of course, corporate superannuation. And AM, BT and MLC are all players in the game.

MLC's corporate super offering is Universal Member Choice. Universal is positioning itself to attract funds with more than five members and between $10-15 million. Universal uses a network of MLC and external planners to capture between 11 and 12 per cent of the market, putting it third on the top ten list of corporate super providers, after AMP and National Mutual.

AM offers a package of corporate super services linked to its LifeTrack master trust. It uses a network of independent advisers to access the market. AM's national manager, corporate superannuation, Grant Wilson estimates the group currently has x per cent of the corporate super market.

BT entered the corporate super market only this year, following its marriage with American group, Principal. Already it has 1.8 per cent of the market from a zero base and is about the fifteenth fastest growing player in the market. Like AM, BT does not own a distribution force, and accesses the market through its network of advisers.

All three groups are keen to become an adviser's "provider of choice" - and it's not hard to understand why.

McGee says that at 30 June 1999, the corporate superannuation market was worth around $28 billion - a figure he expects to grow exponentially over the next few years.

"Australia is the sixth largest market in the world in terms of retirement," he says, "and it's a fairly educated market where the Internet is starting to take hold. It is growing because of mandatory contributions to super which are being made to private institutions. That makes it very attractive to groups like Principal - and that's why Principal is here."

McGee says that by 2008, taking retail growth into account, superannuation in total will be worth over a trillion dollars.

In an era where profit margins are being squeezed, Lawler says corporate superannuation has the capacity to bring profitability back to the planner's practice.

"The market is heading into a new era - an era which is not about corporate super the commodity, but workplace financial planning. Workplace financial planning is a means of distribution. If you sign up with a corporate fund of 200 members you get 200 people to talk to - and you're not just talking to them about their corporate super, but all of their financial planning needs. We believe we are going from a commodity to a holistic financial planning client, where the employer is the means of distribution. That gives the planner access to more dollars - even if profit margins are being squeezed, there is still profit for the planner."

But planners can only get a slice of the action if they are prepared to pull corporate super out of the too hard basket.

Wilson says, "Historically, corporate super was considered too hard - the fund designs were complicated and the cash flow and fund size were not worth chasing economically - there was just no reward for your efforts."

But he says things have changed.

"Larger funds are now seeing the value of master trusts and master trusts have themselves become more competitive. The better master trusts make servicing corporate super easy."

And AM, BT and MLC are all queuing up to be make that job easy for the adviser. Each of the providers offers services designed to not only help the everyday adviser service the corporate super market, but also to break into it.

Lawler says, "We'll work with planners, right from collecting information from the current fund, to putting together tender documents, to presenting the document at the meeting with the corporation. The planner controls the agenda, but we will help them to put together and manage the process."

It's a similar story at both AM and BT.

McGee says, "Our model is flexible. Planners can dial up or dial down the service they require - so we can give them either 100% support or very little. Obviously, our success rate is much higher when we work closely with planners."

The kinds of support services on offer to planners include administration, client service - including regular member communications, education seminars, call centre and internet access - and a range of investment options.

Like BT and MLC, AM provides the full package of services to advisers but Wilson says, "We can also make our master trust 'look like' a corporate fund - the corporate identity is retained on all communications. That overcomes one of the main objections corporates have when considering moving into a master trust."

A practice which services a number of corporates also makes that practice a very attractive purchase, according to McGee.

"Corporate super enhances the value of the business from a succession planning point of view. The stickiness of the funds, the annuity type income stream - there's no question that makes a very attractive option to a purchaser."

Lawler says that for planners out there looking to build their client base, corporate super is the only way to go.

"Most business spend around $100K on marketing to attract new business - you'd only need about half that to secure a few corporate super funds. Corporate super guarantees you a client base."