There’s a major new player in the Australian superannuation market and it’s the world’s biggest fund manager you may never have heard of.
The Vanguard Group is a US based investment colossus with around $10 trillion in assets under management, and until very recently it was managing significant chunks of money for Australian industry super funds.
They may even have been managing some of your money on behalf of your fund, but unless you scoured the fine print of your fund’s annual report you would never have known.
Vanguard has decided to give that up and enter the fray of its own accord, with ambitions to be one of the larger providers of superannuation in the market over the next five to 10 years.
The company has kicked off and launched a new product called Vanguard Super SaveSmart, saying its points of differentiation are its fees and member experience, backed by the investment management know how which comes from managing $10 trillion for its clients.
Michael Lovett, the head of Vanguard Super, tells Really Simple Money that the company has had the advantage of being a super startup and beginning with a “blank sheet of paper”, while also having almost 50 years of global investment experience as one of the world’s biggest fund managers.
The sheer scale of Vanguard, he says, is one of the reasons the company is charging fees of 0.58% for its default option, among the lowest in the market.
“But beyond fees, we think we have quite a unique approach and that is our Lifecycle product, which adjusts 36 times over the course of a member’s life from the age of 47 to 82,” says Lovett. The industry average is four or five adjustments over the same period.
Lifecycle is built on the understanding that younger people will want to take a different investment approach than older people closer to retirement. Younger people are able to be more aggressive and growth focused in their investment approach, while older people will be more cautious and put a higher priority on capital preservation.
The reality is that the vast majority of people are disengaged from their super and, even though these options are available to them, will neglect to change their investment settings to reflect their life stage.
What the Vanguard product does is do that automatically, increasing the allocation to defensive assets as people age.
“I had a birthday recently myself and I went into my account and saw that it had auto-corrected my settings,” says Lovett.
As it was built from the ground up, Lovett says the member experience is “very intuitive and very easy.” Vanguard also includes insurance options in addition to investment.
“You can get through it in under 10 minutes and we think that is really unique and we have some ideas of how we can add to that over time with new engagement tools.
“It’s also incredibly easy to switch funds these days. I did it myself and it only took ten minutes or so and I had a Vanguard super fund.”