It’s the biggest intergenerational transfer in history, but leading super funds could miss out to more targeted newcomers if they don’t learn to speak millennial – and fast.
Young funds call on incumbents to join millennial push
By Ky Chow
It’s the biggest intergenerational transfer in history, but leading super funds could miss out to more targeted newcomers if they don’t learn to speak millennial – and fast.
“Millennials account for a third of the super system. And yes, the funds under management [are] low, it’s about eight per cent.” says Amara Haqqani, Challenger’s Senior Manager for retirement income policy.
“But a third is still quite significant.”
The baby boomer cash cow will eventually dry up, as millennials inherit the vast wealth of their parents.
“Our modelling indicates that intergenerational wealth is flowing at the rate of about $10 billion in assets per annum, and that will grow exponentially, to $35 billion by 2020,” said Rocky Scopelliti, Telstra’s Global Industry Executive for the financial services sector.
UBS has valued that intergenerational wealth transfer at $31 trillion - and super funds are on notice that they may not have a piece of that action.
“The one assumption you can’t make is that when wealth moves intergenerationally, so do the legacy relationships associated with it. It just doesn’t happen that way,” says Mr Scopelliti.
“This will create the greatest spill of wealth we’ve ever seen.”
What are millennial values?
Compared to their parents, millennials have significantly different values, digital adoption and working patterns.
And new super funds are attacking the Gen Y market on all three of those fronts.
Grow Super, which launched in May 2017, has already signed thousands of members by offering millennials a digital-first relationship and allowing investment of 15 per cent of super in social and environmental causes of a member’s choosing.
Deloitte research says 60% of millennials consider themselves personally responsible for the environment.
Grow also caters to the growing number of workers in the “gig economy”, by allowing them to automatically invest spare change.
Incumbent vs new kids on the block
Challenger Limited’s Senior Manager in Retirement Income Policy Amara Haqqani said a split in the industry could occur, with the likes of niche players such as Grow Super targeting millennials, while incumbent super funds focus on older customers.
“I think perhaps there is too much bureaucracy when it comes to trying to implement new technology,” Ms Haqqani said.
“We’re an industry that loves to talk about innovation and disruption…but it’s interesting to see the big pushback for the innovation that does come into the industry. Maybe it behoves us to learn from the new players.”
Incumbents still have plenty to offer
Grow Super Co-Founder Mathew Keeley is hopeful of more partnerships between old and new funds.
“Is Grow going to take the 15 million Aussies out there who have taken superannuation?” Mr Keeley asked.
“I’m going to tell you right here, no.”
“The bigger organisations are very good at what they do, they have scale. But it’s not easy to build the tech we’ve done.” he said.
This conversation was part of our 2017 FSC Leaders Summit held in Sydney on 25 July.