Retail funds losing members to SMSF

Retail superannuation funds are most susceptible to losing members to the self-managed super fund (SMSF) sector, even as member intentions to switch funds drop, CoreData found.

The 2014 Member Retention Report showed intentions to change funds dropped year-on-year, with only 6.7 per cent of respondents likely to switch to another Australian Prudential Regulation Authority (APRA)-regulated fund in the next year, down from 10.2 per cent in 2013.

While intentions to set up an SMSF is also down, retail fund members are most likely to set one up in the next 12 months, with 4.8 per cent likely to do so, while 17.8 per cent intend to do so in the next five years.

Overall the intention to establish an SMSF among all members is down, with around 4.1 per cent likely to set up one in the next 12 months, down from 6.9 per cent in 2013.

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But head of financial services at CoreData Kristen Turnbull said reduced switching intention does not necessarily mean increased loyalty.

"It could just as likely indicate apathy on the part of members. In fact, recent CoreData research has found many of the traditional engagement indicators are actually highly correlated with switching intent."

Members wanting to switch cite high fees and charges (32.8 per cent) and underwhelming investment returns (30.3 per cent) as key reasons, up from 29.6 per cent and 19.6 per cent respectively.

A direct investment option is a good retention tool, with interest in DIOs higher for those with medium (81 per cent) or high (82.6 per cent) switching capability, up from 77.2 per cent and 70 per cent respectively.