Member direct strategies may backfire on industry funds

financial-planning/funds-management/industry-funds/SMSFs/self-managed-superannuation-funds/term-deposits/money-management/

5 November 2014
| By Mike |
image
image
expand image

Industry funds which seek to counter member leakage to self-managed superannuation funds (SMSFs) by offering member direct investments (MDIs) may ultimately find that the strategy has the opposite effect, according to a new white paper examining superannuation industry trends.

The white paper, developed by specialist technology firm, Bravura and which will be published in Money Management's sister publication, Super Review, warned that it was entirely possible that member direct investments could backfire on industry funds by providing members with a taste of independence.

The white paper said that while member direct investments capabilities were being marketed as providing members with the ability invest directly with assets such as shares and term deposits, they were complex and costly to implement and were of questionable efficacy.

"The efficacy of MDIs is questionable as they do not serve to cut the tie with a major institutional provider or provide direct control and ownership over superannuation, which is often a powerful source of motivation for those choosing SMSFs," the analysis said.

"It is also entirely possible that MDIs will have the opposite effect to that intended, by providing members with a taste of independence that will ultimately encourage the move to an SMSF further down the track."

The white paper acknowledged a recent dip in the number of SMSF accounts being established, but suggested that this could just easily be attributed to the economic cycle as it could to the efficacy of MDIs.

"… The jury is out on the success of these solutions. Anecdotal feedback suggests the take-up has been relatively low against the costs and increased risks assumed by the funds," it said. "Super funds need to start thinking outside the square with respect to SMSFs. Astute funds are seeking to share in the fruits of the SMSF market, not by directly competing with it, but by servicing it with likes of investment offerings."

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

1 month 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

4 weeks ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

2 weeks 6 days ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 5 days ago

TOP PERFORMING FUNDS