Industry struggles with MDI challenge
Outside of ongoing regulatory reform, member direct investment (MDI) options are one of the biggest challenges confronting Australia's superannuation industry, according to Graham Sammells, chief executive officer of the IQ Group.
According to the IQ Group, 30 per cent of the Australian superannuation industry is now made up of self-managed super funds (SMSFs), as investors seek and/or are advised on alternative strategies for their superannuation.
Indeed, for many funds, the issue of member leakage is very real, however, Sammells was quick to point out that this may or may not directly relate to the lack of an MDI offering.
His advice was that funds research the issue carefully to ascertain whether an MDI would actually address member concerns.
"An MDI otherwise may be simply a 'bolt-on' strategy and expensive overhead, distracting resources from more significant issues that need addressing," he said. "MDI product design is sensitive to solution design.
"Product, solution and implementation needs to be one streamlined process in order for a fund to avoid a 'bolt-on' product that costs more to operate than it returns," Sammells continued.
"Funds also need to establish support and co-operation across divisions including administration, marketing, operations, finance, IT, investment and all external providers to achieve an organisation redesign capable of delivering a new specialist investment offering."
Sammells added that while product design was one key aspect, distribution was the other major consideration.
"Historically, investors have tended to rely on financial advisers and accountants for retirement and financial planning," he said. "However, MDI is designed for the member to do it themselves.
"Therefore, the challenge for funds is to find the right mix of credible distribution channels that will reach the target market and the right time," Sammells added.
"This will require co-ordination across direct and advice channels, and reviewing the nature and role of relationships with employers."
Originally published on SMSF Essentials.
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