Vanguard Super?

Appear to be still hiring

 

I got an email from vanguard super asking what I would like in my ideal super fund yesterday. It is definitely scheduled for later this year.

 

I suspect part of the issue will be ASIC and APRA and the benchmark problem ahead of issue of any license and fund approvals under SIS (Superannuation Law). Industry funds etc are all required to bechmark performance and maintain competiveness etc. And simple super options. Industry fund will be screaming if they have to adopt one approach and Vanguard allow "DIY choice" to be the investment strategy. This wont work. Our model is very different to non-mandated UK pension options which Vanguard has experience with. Here is the Govt view on reform to make fund competitive, performance based on well managed for risk:
https://treasury.gov.au/sites/default/files/2020-10/p2020-super_0.pdf

I wonder how APRA will regulate Vanguard to a "trustee directed product" and a Your Super mandate ? While Vanguard may aim to be and successfully deliver low cost this may misrepresent exposure and risks to member retirement savings based on age and lifecycles.

APRA must be very concerned many people could push super onto the table as "all in" as member directed investmnet choice and face a market correction that decimates retirement savings through risk. This exposes taxpayers to age pension claims when investmnet capital is lost through mismanagement. If Treasury are concerned about performance they will be concerned about capital risks through speculation. The smsf property leverage issue was a Treasury concern so DIY market "all in" exposure must certainly be a concern they must address.

 

New York-listed fund manager Invesco has picked up a $23.1 billion contract to run passive investment strategies across the former ANZ Bank superannuation funds in what is believed to be the nation’s largest external investment mandate.

Wealth manager IOOF on Monday said it had chosen the Atlanta, Georgia-headquartered Invesco as the new manager of 14 index investing mandates relating to the OneAnswer, Smart Choice and OnePath products it acquired as part of its takeover of ANZ’s wealth arm in January last year.

The multibillion-dollar account came up for grabs after index investing pioneer Vanguard, the world’s second-largest asset manager, announced it would no longer manage money for third-party super funds, first reported by The Australian Financial Review in October.

Vanguard is instead focusing on an “ambitious plan” to manage superannuation assets directly, with the launch of an APRA-regulated fund expected later this year

Vanguard’s $23b ANZ mandates won by US rival

 

Maybe something like this coming?

Vanguard UK Personal Pension

• Invest from £100 per month or start with a £500 lump sum
• Choose a ready-made portfolio or build your own
• You can add to your pension whenever you want, just make sure you keep your allowances in mind
• Choose from over 75 individual funds – including ETFs, active funds and index funds.
• Just 0.15%, capped at £375 per year

Unlike some pension providers, we don't charge a fee when you want to start using your pension savings.

Horses for courses but UK has this

Can my employer make contributions to the Vanguard Personal Pension?
We don't support auto-enrolment for employees or salary sacrifice, and we can't accept pension contributions from your employer.

*A SIPP is a Self Invested Personal Pension

 

The Vangard products (must be at least two eg accumulation + pension and likely more eg "MySuper" compliance) will need to consider and satisfy our Superannuation Industry (Supervision) Act and Regs which is far more onerous than UK rules as the our employer super is 10% v the UK 3%. Australian super is very highly regulated by one broad set of laws which govern different fund types so they are largely similiar. Our super is also portable but increased rules on what an acceptable fund is can limit that. I suspect it will be lower cost but (far) more than 0.15% and with exceptionally limited investment choice to satisfy "My Super" requirements. Our portability, reporting, taxation and release system (excess contributions,. Div 293, covid, hardship) is more complex and adds more cost for any fund trustee who will be custodian of each members account.

The benchmark rate is our cheapest industry fund. Industry funds arent all "for profit" and have higher fees. Around 0.75% plus.

What Vanguard may do is step into a void by offerring a capped fee that acts like a fixed maximum fee (subject to product investment margins) . At present no industry fund offers that but their fees are as low as .19% for the additional funds under management after any base amount and fees.

 

HostPlus do a fixed $78 p.a. admin fee plus investment margins with no AUM based admin fee. Is that what you mean or have I misunderstood?

 

Industry funds also offer direct ETF options (eg HostPlus ChoicePlus and Australian Super Member Direct). How would this be any different for Vanguard?

Could they just offer the wholesale VDHG, VDGR, VDBA, VDCO as their High Growth, Growth, Balanced and Conservative options couldn't they and also allow for member direct ETF style options.

 

@Paul@PFI I think you over dramatise it a little.

Vanguard offers ETFs such as VDHG and VDCO that are a combination of asset types and risk classes which could mirror "Conservative" "Balanced" and "Growth" etc that we currently see in the Super market. Those would be the default options, along with Cash. What you miss out on is the infrastructure investments, although that's not necessarily a bad thing imo, Covid showed that unprecedented cash out on those projects have issues too.

I think they'll be able to match the low fees of other super products, because the products on offer will essentially be what they already do.

 

That isnt correct. The $78 is ONE of their fees. Investmnet fees may be higher ($355 for balanced). That is based on $50K. The more you have the more it costs. Hosplus example of the $78 says total annual cost is $628. Big difference.
Fees

 

Yes but not quite. I can forsee the regulatory hurdles. The product ones are simple. They will have to consider caps and limits as a trustee not just as a product developer. It wont be "all in" free choice. I suspect they will have certainly have options similar to those default risk classes (more of them) but with internal capacity for some limited +/- choice and even some additional categories eg there was talk of some property based EFT products eg they could partner with a entity like Mirvac and offer a resi apartment ETF etc for indirect property interests. Maybe a aged care residential property ETF and so on. A way for many funds to own fractional direct property perhaps ?? I am also interested in what they do with a more "member directed" option. For sure they will be lower than present industry funds in terms of fees. But not 0.15% based on UK experience and examples that are frequently estimated. Our system contains more compliance issues that come at a cost. Even matters like insurancesand death nominations etc are cost issues unlike the UK. Pensions. And adopting the "one fund" and other reforms incl MySuper also complicate it somewhat. The delay reflects the complexity in gaining approval.

 

Sure, everything has investment fees too, but I thought you were comparing to something like Australian Super which charges a 0.04% admin fee on your balance in addition to investment fees. Hostplus on the other hand is a fixed $78 + investment fees.

Or was this statement referring to something else I'm missing
"What Vanguard may do is step into a void by offerring a capped fee that acts like a fixed maximum fee (subject to product investment margins) . At present no industry fund offers that but their fees are as low as .19% for the additional funds under management after any base amount and fees."

 

Many people misunderstand total fees. Direct fees in the Hostplus example are good. $78 is more like $628 and thats a $50K example (1.256%). And even then the indirect fees are badly understood. These are costs paid prior to member income being shared. Vanguard will have those but are known for their low cost approach to product pricing. Focus on $78 is really not practical since it misrepresents total direct costs.

I would expect Vanguard will (like in the UK) offer a capped fee based on industry speculation on how they can outcompete industry funds but they cant do it with one element of fees. They must do it with total fees. They can then compete with industry funds who ALL work on marginal fees that rise with balance even if it tapers off marginally. They could create a cheeky compare the pair marketing blitz and grab attention. There are millions of industry fund members and its their target.

 

All offerings have an MER on underlying investments

When it comes to admin fees
Vanguard Personal Investor (non super) has a 0.2% admin fee (capped at $600)
Australian Super has a $117 p.a. plus 0.10% (capped at $800)
HostPlus has a $78 p.a. with no AUM based admin fee

What am I misunderstanding?

 

HostPlus could have cheaper admin fees but higher investment fees than other options so therefore the total fee could be higher which is what Paul is pointing out - admin fees don't mean anything, total fees are what is important in the comparison.

 

Eagerly waiting for their release.
More power to the people with more competition.
Australia super have become fat and lazy.

 

I'm of the same opinion as you HM. Hence why I am with Hostplus. Cheapest.

Waiting to see what VG offer...

 

Vanguard keeping one eye on smsf trustees

Vanguard Investments Australia

 

Last update

 

Nothing has altered. There is no PDS and no information.