New kids on the block set to disrupt traditional super industry.
A day after think-tank the Grattan Institute called for lower superannuation fund fees, financial giant Mercer and discount online retailer Kogan.com have delivered.
The two unlikely bedfellows are joining forces to launch a “no-frills, ultra-low fee” super fund early next year.
The partners say they will be able to keep fees low by offering investment options that track index funds.
Index funds tend to invest passively in shares offering a broad exposure to markets. They are considered less risky, minimising the need to charge extra fees for active management of a portfolio.
The product will be called Kogan Super and joins a stable of Kogan services including insurance and mobile phone plans.
SuperRatings executive director Kirby Rappell told YourLifeChoices the product would need to beat the Hostplus Indexed Balanced Fund annual fee of $113 (based on a balance of $50,000) to claim to be low-cost.
“We are entering the age of disruption in the super industry, with a lot of players eyeing opportunities to offer their own products,” Mr Rappell said.
Companies without a traditional banking background that have recently launched differentiated super products include Virgin, Spaceship and Acorns.
“I believe the industry is changing and Australians will soon be able to choose from more white label products that are coming to market,” Mr Rappell said.
“When it comes to returns, asset allocation is key and what we have found in the past 15 years is that the funds which have done well are those that have invested in infrastructure, alternative assets and hedge funds, which are unlikely to be offered by an index-based fund.”.
A number of Mercer super products scooped top spot in SuperRatings’ awards this year.
Meanwhile, in a note to the Australian Securities Exchange, Mercer chief executive Ben Walsh said the new super partnership marries Kogan.com’s expertise as an e-commerce leader with Mercer’s global scale and know-how as a leading superannuation and investment services supplier.
“As one of the largest superannuation providers in Australia, with more than $US11 trillion under investment advisement and more than $US240 billion of assets under delegated management globally, we are able to use our global scale and expertise to drive competition and get better results for clients and members,” Mr Walsh said.
“In an industry where scale and cost efficiencies count, this new alliance will enable Kogan to create value at scale through their trusted online brand and huge customer base.”
Kogan will be aiming to manage a share of the 28.6 million Australian superannuation accounts, which represent a combined total of more than $2.7 trillion in assets.
With more than 1.45 million active customers, Kogan.com is one of the nation’s largest e-commerce companies.
“This partnership will deliver a no-frills superannuation offering with ultra-low fees that will enable Aussies to retain and preserve more of their personal wealth,” Kogan.com executive director David Shafer said in a statement.
“Albert Einstein once said that ‘compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it’.
“Every Australian should consider whether the power of compounding is working for them through low fees, or against them through the ongoing erosion of their wealth by high fees.
“Kogan.com’s mission is to deliver price leadership through digital efficiency and we are proud to be able to help Australians preserve more of their hard-earned money by delivering an ultra-low fee superannuation solution.”
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