Planners tap corporate super vein

The focus on corporate superannuation is long running and is centred mainly on the complexities involved with branching into it. But as Nicole Szollos discovers it is now an easily integrated and vital component for dealer groups and planning firms wanting to take business to the next step.

As with superannuation in general, the amount of money within corporate superannuation funds just keeps growing every year. The Australian Prudential Regulation Authority (APRA) Superannuation Trends Survey at September 2000 reported a total of $79.5 billion sitting in Australian corporate super funds, up by about $10 billion from the previous year's figures.

At the end of December last year, $36.7 billion worth of corporate superannuation was in master trusts and spread over funds from 47 different product providers, according to Rice Kachor Research's latest quarterly Employer Super Analysis figures.

That corporate superannuation is a lucrative business is not new. Since the introduction of compulsory employer superannuation contributions nine years ago, corporate superannuation money has meant big business to a number of financial services companies.

Historically however, the market has remained saturated with the larger product providers, distributors and dealer groups, as many smaller players stayed away from what they considered a difficult area. But for those who have not made the leap into corporate superannuation, industry feeling is suggesting now is the time due to increased opportunities and product integration assistance.

As a partner of national consulting firm Shirlaws, Chris Dionne spends a lot of time working with financial planners and accountants, helping with the progression of their business. For some of the practices that Dionne works with, help begins at the level of establishing the company as a fully functioning business.

"It is common to find that financial planning firms don't have an appropriate structure and are not operating to their full potential," he says

And, Dionne adds, it is these companies not operating efficiently who are missing out on a significant source of revenue plus the value added opportunities available with corporate superannuation funds.

As the amount of money invested in corporate superannuation continues to grow, APRA figures report the number of funds are dropping. From September 1999 to September 2000 corporate super fund numbers decreased by 231 to 2065, and the number has been steadily declining over the past five years.

Dionne believes the decrease is a result of companies with in-house corporate superannuation funds turning to product distributors and the services they offer, and outsourcing their corporate superannuation. He says this is good news for financial planners wanting to expand and pick up new clients.

"With the number of corporate super funds dropping, opportunities exist in the market place for financial planning businesses to set up their own corporate funds," he says.

Dionne is presently working with several clients making the move into corporate superannuation and says some have chosen to provide a product from one of the distributors, while others are setting up their own internal funds, assisted by Shirlaws.

"Some want to set up spin offs, and we show them how to fold in all the products and also look at outsourcing certain elements for a balance," he says.

One of the key points when setting up a corporate superannuation fund, Dionne says, is that the package on offer to the client must include a complete list of services and advice, thereby maximising the benefits of value added services to the financial planner.

"Service levels are a big issue, and there needs to be advice around the salary packaging," he says.

If corporate superannuation is the next step for financial planners looking to grow their business, how has it been made easier to break into? Establishing an in-house fund is a lot of work, carrying with it back office and compliance responsibility.

But groups who do choose this route have the option to outsource certain elements, giving them access to a degree of support. The popular model however has proved to be the corporate superannuation funds distributed by the big name product manufacturers, who have opened up access with a better level of back office support.

The amount of money in corporate superannuation funds within master trusts from the 47 product providers illustrates the growth in corporate super. At the end of December last year the amount was up by $7.3 billion from the previous year's total, according to the Rice Kachor research.

The view from the distributors side also suggests that an increase in companies outsourcing their employer superannuation funds has opened up opportunities for financial planning groups.

Earlier this year BT Funds Management reached the $1 billion mark in funds under administration for its corporate superannuation product, the BT Lifetime Super - Employer Plan. BT head of corporate investment services Dan McGee says the growth is due to the advisory industry recognising corporate superannuation as a major growth area.

"Advisers are thinking about corporate superannuation more and more, and dealer groups are evaluating master trusts to see what meets the needs of their group," he says.

Additionally McGee believes product providers are attempting to educate financial planners on the opportunities that exist in corporate super.

"The industry is starting to see a shift with looking at the accumulation market, which is a transition from the transaction model," he says.

Value add services are key to the opportunities inherent in corporate superannuation, and McGee believes advisers need to be comfortable and involved with the product provider. This maximises the benefits of corporate superannuation and, he says, is a great way to build business with investors.

"Advisers were traditionally a go between for the client and product provider, and historically there was little value add. The difference now is asking, what is the value add?," McGee says.

The level of involvement with a product provider, although determined by the financial planner, can be affected by the support services on offer. The BT fund offers a range of services to the financial planner and the clients, including prospecting, delivery of education, product comparisons and Internet resources.

Another big distributor on the market, AM Corporation, also identifies the significance of support services in assisting the entry of new groups into corporate super.

Corporate superannuation national manager Grant Wilson believes advisers traditionally have not been involved with corporate super because they don't know the questions to ask. As one of its support services, AM takes the role of educator and runs workshops to teach the basics and begin the involvement.

The AM product, the LifeTrack Corporate Superannuation fund, is aimed at medium to large businesses and is a division of the greater LifeTrack Superannuation Fund, which has more than $3 billion funds under administration. About $700 million of that belongs to the corporate product and a second smaller retail corporate super product.

Wilson says AM offers the whole package of services, but not all advisers choose to use all of those.

"There are different levels of involvement and it can be very hands on or very hands off, the adviser just needs to decide what they want," he says.

The trend towards corporate superannuation is, according to Wilson, a reflection of market dynamics changing, with better services and support and the ability for financial planners to make a worthwhile profit.

"With the contributions guaranteed at eight per cent and moving to nine per cent next year, there is a decent level of cash flowing into these products to make more money," he says.

The ability to add value for clients and the opportunities this creates are again a big part of the increasing popularity of corporate superannuation for AM, and Wilson points to retirement planning and retrenchment as two key areas.

"It is sticky money if there is a good service provider," he says.

For the Commonwealth Bank (CBA) the level of support service available is also driving the group's corporate super products. Investments and insurance general manager Peter Beck hones in on the compliance and legislative back office support system as the reason for a rise in popularity of the corporate super funds on offer.

Additionally, he says greater consumer awareness and the increasing choice of funds and investment styles has continued to open up the market.

The CBA distributes five corporate superannuation products, including three from the Colonial, through salaried consultants, independent advisers and network advisers. The funds cover small, medium and large businesses, and all up look after a current total of $2.9 billion.

With its array of products, the CBA's support services include help with choosing the right fund and continuing education, plus compliance and licensing support which may be particularly attractive to smaller organisations, Beck says.

For all three of the groups, corporate superannuation is identified as a definite future growth area, with both the amount of super money going into funds and the number of financial planners and dealer groups making the move into corporate superannuation products.

Wilson predicts the next three years in particular will be strong growth area as money in corporate superannuation continues to grow and more companies start to outsource their internally managed funds. The changes will continue to create a goldmine of opportunities for financial planners ready to take on the corporate super world.