Interest fee

The launch of Vanguard Super reignites the fee war

Three years after first announcing plans for a retirement offering, Vanguard now offers one of the cheapest MySuper products – a lifecycle solution that automatically adjusts 36 times.

It was in November 2019 that Vanguard’s Robin Bowerman revealed the indexer’s plans to re-enter the super sector. Later that month, Michael Lovett was appointed superannuation manager, responsible for leading development and launch.

Three years later, Vanguard today unveiled Vanguard Super SaveSmart, a lifecycle MySuper product and a suite of diversified index-based options and unique sector options.

The product has 36 cohorts, with the allocation to growth assets expected to start decreasing when a member turns 47. A typical lifecycle product adjusts allocations four or five times.

A key selling point of the product is its low cost, including no dollar fees. The lifecycle option costs 0.58% total fees per year, which according to Rainmaker analysis makes it the cheapest on the market for a balance of $50,000 – but fair. ANZ Staff Super has a fee of 0.588%.

But it will get cheaper, says Lovett.

“We never set ourselves to be the cheapest in any category, we are a low cost supplier, but I think the difference with us is that we cost less over time,” he says. .

“So the more success we have, the lower our fees will go. What we have now, we think is competitive, but it’s going to go down in five years with success; we’ve been in Australia for 25 years, and we’ve lowered our prices 40 times, so we used to do that.”

About 18,000 potential members had expressed interest in adopting the product yesterday, in addition to several financial advisory firms who will be able to access it through the Vanguard Adviser Portal, which will be rolled out in the coming months.

“Not all will follow, we know that. But we think a good number will, so we’re really excited about the early business opportunities. We have both channels that are reasonably ready to move, so we’re thinking out of the gates. , we will have strong flows,” says Lovett.

While he admits recent stapling laws present a challenge, Lovett said it’s all about perspective.

“In the short term, yes – stapling is a potential hurdle for us. But there are two ways to look at stapling. One is that it’s a challenge, the other is that it’s a opportunity because once you win the client, it’s stapled to you,” he says.

He also acknowledged that it might be difficult to be committed to listed investments at a time when most super funds typically only generate performance from unlisted investments, but he says he is convinced that it is Nevertheless, it is a high quality product. It also does not rule out adding unlisted assets down the line.

“Unlisted goes through cycles like most assets, but we don’t inhibit ourselves. At some point in the future, we might add them; in the US, we’ve added unlisted assets to our portfolios,” he said.

“The most important thing with private assets is liquidity, knowing how many redemptions you are going to have to get out of the fund. which we will need before adding unlisted assets.”

This is Vanguard’s second time launching a super product in Australia, having taken on corporate mandates in a short stint with MLC Plum before packaging it in 2003.

The landscape is noticeably different now, Lovett says. However, he admits that in developing the offering, Vanguard looked at the mistakes made by the many so-called “disruptive” funds that have popped up in recent years but failed to actually disrupt, one of its own GROW administrator among them.

“There have been several, and we think we are very different. We have a strong brand with financial intermediaries and that is going to be a key channel for us, but we also have a strong brand with a small but growing population in Australia…so we think the natural advantage we have is the existing brand and capabilities with advisors and multiple consumers, and that’s what we’re going to focus on first,” he says.

“There’s no doubt there are some really healthy competitors and some good competitors out there, so it’s going to be tough to disrupt, but we’re confident we can.”

Rainmaker Information’s Executive Director of Research, Alex Dunnin, is confident that will also be the case, saying: “This new fund is going to disrupt Australia’s pension system massively, and in a great way. They may not not the very large, long-established powerful funds, but the smaller, mid-sized or less confident funds will be watching Vanguard Super very closely.”

Vanguard Super’s administrator is GROW, its custodian is JPMorgan and its group insurer is AIA Australia.

This article first appeared on Financial Standard

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