Tomorrow marks the first day of superannuation choice and Roy Morgan
Research CEO Michele Levine has entered the fray today with this paper on the shape and popularity of the top super funds and sectors.

There is little doubt the Howard government has framed the legislation
to make life tougher for union-backed industry funds which have
prospered with their low cost model, thereby delivering substantial
out-performance.

Various experts are predicting a flood of mergers in the smaller end
of the market as hundreds of corporate funds will vacate the field and
allow the big banks to slug it out with the industry funds. The only
clear winners at this point are the media companies and printers who
will soak up tens of millions in extra advertising and mailouts.

Roy Morgan estimated the super market to be worth $796 billion,
although this includes $100 billion for unfunded government super.
In terms of assets, AMP leads with $52.5 billion (including $30k
of mine that will soon be rolled into JUST Super, an industry fund).
This is only 6.6% of the dollars but AMP has 9.3% of the customers,
suggesting a preponderance of smaller balances.

The Commonwealth Bank comes second with 7.5% of the customers and 6.2% of the dollars, equivalent to $49.3 billion.

Morgan has measured satisfaction and this is highest with the $58
billion in self-managed funds, 73.6% of whom are satisfied. Government
funds follow with a satisfaction rate of 56.3%, although the millions
of public servants are presumably happy with the big licks governments
will pay in the future, but less happy with the fact that almost $150
billion of it is unfunded.

Industry funds as a whole control about $106 billion and their
satisfaction rate is 48.7%, higher than all the big banks and
insurers who range between 47.5% for the NAB, down to 40% for Westpac.

All of this suggests industry funds are well positioned as their
customers are more satisfied and their low-cost models have clearly
delivered superior returns than the gouging big banks and life offices.

The biggest problem for industry funds is the commissions paid by the
for-profit sector to financial planners. If they go out and attract new
customers, whether by advertising, commissions or thanks to the choice
legislation, it could get messy down the track ascribing value when an
industry fund is inevitably sold or merged with a for-profit fund.

Peter Fray

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