TWILIGHT SEMINAR SERIES INDUSTRY RATIONALISATION THE THINGS FUNDS - PowerPoint PPT Presentation

TWILIGHT SEMINAR SERIES INDUSTRY RATIONALISATION ‘THE THINGS FUNDS NEED TO DO TO PROSPER’ FEBRUARY 2016 [Date]

FUTURE DISRUPTIVE TECHNOLOGIES Session One Michael Rice Colin Kelton Roland Slee CEO, Rice Warner Managing Director, Vanguard Managing Director, Bravura An Australian view Trends in the USA Trends in the UK 1

An Australian view Michael Rice Rice Warner 2

EVENT OUTCOME   Award Super & SG Growth of industry funds   SIS legislation Demise of corporate funds Past Disruption in   ASX Chess Growth of SMSFs Superannuation  Growth of superannuation  Choice of Fund fund brands and marketing  Growth of retirement  Baby-boomers retiring strategies and financial advice models 3

It has facilitated growth of online sharebrokers  Expanded retail investors  Driven down transaction fees for share-trading Impact of Expansion of products CHESS  Exchange Traded Funds (ETFs)  mfunds (managed funds)  Direct investment in international shares  Interest Rate Securities  Derivatives 4

 Financial advice  Retirement strategies Future  Life insurance Disruption  Administration  Investment 5

Trends in the USA Colin Kelton Vanguard 6

Trends in the UK Roland Slee Bravura 7

SUPERANNUATION FUND INTERACTIONS WITH MEMBERS Session Two Heather Brown Nathan Bonarius Steve Freeborn Consultant Consultant Head of Client Relationships 8

SUPER INSIGHTS AGENDA ENGAGEMENT LOYALTY 9

An Insight into the Future Nathan Bonarius Consultant 10

Rule Number 1 – Know your member Member engagement But… Superannuation funds don’t always know everything they need to know about their members 11

24 Funds 10.8 m member $346 Bn FUM accounts Super Insights 38% of the total Superannuation market by member account 12

Consolidation 13

Consolidation 14

Insurance 15

Default Investment Option 16

Investment Decisions: Male vs. Female 80% 70% Investment 60% choice by 50% Gender 40% 30% 20% 10% 0% Selecting a Choice Investment Invested in Growth Assets Male Female 17

Voluntary Contributions 18

Exits destinations 19

Pensioners - Drawdown Rates 20

Variations between funds 21

Lessons learnt Sometimes a variable isn’t as big an influence as you think…let the data talk for itself 22

Engagement What key developments are happening in the market now Heather Brown Consultant 23

Member needs The Superannuation market is ever changing. 24

Attitudes and behaviours Current financial burdens take priority now. 25

Superannuation Budgeting Saving Self- Retirement Investments Education Members want to find solutions for themselves. 26

Career break Engagement Maternity leave Caring for elderly Attitudes to Gender focus relatives investment Women and Men engage differently with Super. 27

Benchmarking Women Strategy Solution implementation incentives and engagement strategies Member briefings Online tools Gender specific financial planning 28

Education Quick and easy access to information. 29

Loyalty Where we see the future going Steve Freeborn Head of Client Relationships 30

Human Behaviour What will drive action by members? 31

Digital Disruption First to get it right will win! 32

Loyalty The challenge is retaining members in the face of competition. 33

End game Retaining members through retirement. 34

Retirement Income Solution Greg Cantor CEO Australian Catholic Superannuation & Retirement Fund 35

This presentation has been prepared by SCS Super Pty Ltd (CAN 064 712 607, AFSL 230544, RSE L0002264), the trustee of the Australian Catholic Superannuation & Retirement Fund ABN 24 680 629 023, RSE R1055436. Any advice contained in this presentation is of a general nature only, and does not take into account your personal objectives, financial situation or needs. Prior to acting on any information in this document, you need to Disclaimer take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering and seek independent financial advice if you are unsure of what action to take. The material contained in this presentation is based on information received in good faith from sources within the market and on our understanding of the legislation at this time. 36

What is RetireSmart? 1. RetireSmart is an account based pension product that was developed in consultation with Rice Warner and our investment consultant 2. RetireSmart is for members who have retired and who want to move their Superannuation to a Pension and receive an income on a weekly, fortnightly, monthly, bi-annual or annual basis 3. RetireSmart is also open to members who are transitioning to retirement RetireSmart 4. RetireSmart is for members who do not want to make and manage their own investment options and have some tolerance to risk 5. RetireSmart is a retirement-specific solution designed to assist members in meeting their income and expenditure needs in retirement 6. RetireSmart does this by investing in growth assets focused on generating for members a reliable stream of income, whilst also allowing for capital growth to help preserve their balance 37

What is RetireSmart? RetireSmart’s core feature is the design of its simple two bucket approach and how the distribution of income and earnings serves to provide members with a greater level of reliability and comfort around their pension payments and where these are drawn down from. This design feature avoids the need to regularly sell assets such as shares in order to supplement pension payments and avoids the need to time the selling of assets to avoid crystallising any losses. RetireSmart While pension payments from the Growth option need to be funded from the sale of investments (which may need to occur during times when investment markets are down), pension payments from RetireSmart are only made from the Cash Bucket – this is unless, a member requires to make a withdrawal that is larger than the balance of the Cash Bucket 38

1. Invests in two investment options: a) Growth b) Cash 2. We invest 2 years of a member’s initial investment into the Cash option, allowing it to grow up to 3 years’ worth of Cash 3. Pension payments can be taken weekly, fortnightly, monthly, half yearly or yearly and are taken from this Cash option RetireSmart 4. Income distributions are processed from Growth income and transferred to Cash 5. Capital growth distributions above the nominated CPI and hurdle rate (3.5%) are processed annually from Growth to Cash 6. If your investment in Cash grows beyond 3 years we transfer this amount into the Growth option 39

High dividend paying to utilise RetireSmart Growth SAA (%) Ranges (%) income and Asset Classes Australian Shares 30 20 - 50 franking credits International Shares 33 20 - 50 Infrastructure 8 0 - 20 Property 8 0 - 20 Growth Asset Alternatives 10 0 - 20 Multi-Asset 8 0 - 20 Bonds 3 0 - 30 Allocation Cash & Term Deposits 0 0 - 30 Total Assets 100 Currency Hedging International Shares 50 0 - 85 FX Exposure in Infrastructure 50 0 - 85 FX Exposure in Property 50 0 - 85 FX Exposure in Alternatives 50 0 - 85 FX Exposure in Bonds 0 0 - 5 40

1. Re-branding the existing product names 2. Form re-design 3. Consider how we would project the PDS i.e. would we combine the two or would they be Other criteria separate we considered 4. Web updates 5. How would we market this to our members 6. Integrating into our CRM platform 41

The years that followed 1969 saw equity markets collapse as a result of the global oil crisis. With a member retiring at 65, in 1969, projecting their retirement savings across life expectancies, (as depicted by the vertical lines), our modelling shows that the Growth option with 3 years’ cash and the Balanced option with 2 years’ cash suffer similar losses during market downturns, but the Growth option experiences a better recovery as markets recover. While the Growth option with 2 years’ cash suffers the greatest losses during market downturns, it is however able to recover and deliver a better outcome than the Balanced option with two years’ cash. Investment scenario 1 Source - Rice Warner 42

With a member retiring in 2004, into what is a rising market and subsequent GFC, our modelling shows that the Growth option with 2 years’ cash and also with 3 years’ cash achieve similar outcomes, while the Balanced option, although suffering the least during the GFC, is not able to recover strongly enough into a recovering market, and therefore lags. Investment scenario 2 Source - Rice Warner 43

SYDNEY MELBOURNE ABN 35 003 186 883 AFSL 239 191 Level 1 Level 20 2 Martin Place 303 Collins Street Sydney NSW 2000 Melbourne VIC 3000 P +61 2 9293 3700 P +61 3 8621 4100 www.ricewarner.com F +61 2 9233 5847 F +61 3 8621 4111