Fund supermarkets in Australia 2007

New business sales in Australia for retail managed funds increased 29%, from USD179.6 billion for the year-ended June 2006, up to USD230.5 billion for the year-ended June 2007. Australia’s biggest banks dominated new business sales with St George, Westpac and NAB receiving the highest annual growth. Industry experts feel that fund costs are likely to decline further as competition between fund supermarkets intensifies, especially surrounding the superannuation market. Financial adviser fees are currently under scrutiny from the industry and media sources and customers are likely to reap the rewards of tighter adviser costs in the future.

Scope

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Report Highlights

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OVERVIEW 1
Catalyst 1
Summary 1
EXECUTIVE SUMMARY 2
The Australian managed fund market is the fourth largest in the world 2
Household funds are set to increase between 2007-2011 2
The new reforms will see more money enter superannuation 2
Competition between Australian fund supermarkets is intense 2
The future of supermarkets is bright 3
DISTRIBUTION DYNAMICS 6
The Australian managed fund market is the fourth largest in the world 6
Market Size 6
Households accounted for 42% of the Australian investment (non-superannuation) fund market in 2006 7
Australia is the fourth largest market in the world and the biggest in Asia Pacific for managed funds 8
Superannuation funds account for over half the Australian managed fund market 8
Demand for managed funds is increasing 8
The major local banks hold over half the total retail managed funds in Australia 9
Fund supermarkets have a number of advantages 9
Australia's biggest banks also dominate the fund supermarket space 9
St George and BT/ Westpac recorded the highest annual growth of retail fund inflows 10
Macquarie received the largest share of fund net flows for the year-ended June 2007 11
Customer Characteristics 11
The average Australian fund supermarket customer is middle-aged and investing for retirement 11
Over 50% of retail managed fund net flow is into superannuation 12
More Australians own superannuation then before 12
DISTRIBUTION FORECASTS 13
Household funds are set to increase to USD131bn between 2007-2011 13
REGULATORY CLIMATE 15
The new reforms will see more money enter superannuation 15
Australians have benefited from the recent superannuation changes 15
Individuals aged 60 and over can access their superannuation benefit tax-free 15
Limitations on concessionally taxed superannuation contributions have changed 16
Post- tax superannuation contributions are limited to AUD150,000 per annum 16
The transitional AUD1 million contribution limit served to boost fund inflows 16
DISTRIBUTOR PROFILES 17
Competition between Australian fund supermarkets is intense 17
Colonial First State has a relatively large fund offering 18
Colonial First State offers one of the widest ranges of funds 18
CFS's charging structure is low for the industry 18
CFS offers other core services 19
Advisers and clients have access to FirstNet services 20
The CFS website offers high functionality 20
BT is a leading white label Australian fund supermarket 21
BT offers a relatively small range of funds to direct investors 21
BT's charging structure is average for the industry 21
BT offers other core services 22
BT does not offer online application to all fund types 23
MLC is a leading 'manager of managers' 24
MLC offers a relatively small range of funds to investors 24
MLC's charging structure is standard for the industry 24
MLC offers other core services 25
MLC does not offer online application to its funds 25
AMP Financial Services is one of the biggest Australian fund supermarkets 26
AMP offers a large range of funds to investors 26
AMP's charging structure is high for the industry 26
AMP offers other core services 27
AMP does not offer online application to its funds 28
Fees and charges have been driven down by competition 29
DISTRIBUTION STRATEGIES 31
The future of supermarkets is bright 31
Fund selection is driven by client demand 31
Platform selection is based on strategic fit 31
Marketing strategies will depend on the target group 32
Fund supermarkets will continue to be an important distribution channel for managed funds into the future 33
The increasing popularity of self managed superannuation funds will require fund hosts and fund providers to track their developments 33
A reduction in the charging structure of managed funds will encourage participants to focus on new revenue streams 34
Volatility in the markets will result in an increased customer demand for structured and alternative investments 34
APPENDIX 36
Definitions 36
Brokerage Firms 36
Fund Supermarket 36
Household savings and investments 36
Investment Funds 37
Managed Funds 37
Retail Funds 37
Self Managed Superannuation Funds 37
Superannuation fund 37
Methodology 38
Further reading 38
Ask the analyst 38
Datamonitor consulting 38
Disclaimer 38

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Table 1: Australian household savings and investments market, USDm, 2002-06 6
Table 2: Australian household savings and investments market, AUDm, 2002-06 7
Table 3: Total investment (non-superannuation) funds under management segmented by investor type 7
Table 4: Consolidated assets of managed funds segmented by institution type, December 2005-06 8
Table 5: Retail funds under management segmented by fund administrators, AUDm, June 2006-07 9
Table 6: Gross fund inflows segmented by fund administrators, AUDm, June 2006-07 10
Table 7: Retail fund net flow segmented by fund administrators, AUDm, June 2006-07 11
Table 8: Retail fund net flow segmented by investment type, AUDm, June 2006-07 12
Table 9: Forecast of the Australian household savings and investments market in USDm, 2007-2011 13
Table 10: Forecast of the Australian household savings and investments market in AUDm, 2007-2011 14
Table 11: Retail fund inflow segmented by market, AUDm, Q1 2007- Q2 2007 16
Table 12: Comparison of some leading Australian fund supermarkets 17
Table 13: CFS FirstChoice superannuation and investment funds fee structure 19
Table 14: BT superannuation and investment fund fee structure 22
Table 15: MLC superannuation and investment fund fee structure 25
Table 16: AMP superannuation and investment fund fee structure 27
Table 17: Management fees of MLC investment options have dropped since 2003 29




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