SS&C’s Future Super report found that as funds consolidate due to regulations, a larger pool of assets will eventually result in Australia’s first “mega fund,” with more than $200 billion in funds under management (FUM).
However, despite growing to an enormous size, the report found the outcomes might not flow on to members.
“Despite this, there seems to be upward, not downward, pressure on member fees,” the SS&C report said.
SS&C flagged the possibility that regulation-driven consolidation might not be enough to improve member costs and could lead to an increase in compliance costs and a decrease in competition from a smaller field of funds, adding that one of Australia’s largest funds had recently announced a new fee attributed to regulatory costs.
“We believe scale must be accompanied by digital transformation and innovation to drive down underlying costs and simultaneously improve the member experience,” SS&C said.
That transformation will involve greater co-operation with Australia’s fintech community and integration of systems and partnerships to create “member-centric ecosystems”.
“Open banking will also be a driver and will result in dramatically improved decision making for funds and their members,” SS&C said.
“A revolution in payments and transaction clearing will drive improved efficiencies, speed and security. This will be driven by initiatives such as the New Payments Platform and the ASX blockchain-based replacement for CHESS, which has a target go-live of 2021.”
But regulatory change and attention – particularly the scrutiny arising from the release of APRA’s super heat map – “will continue to stretch funds and compromise trust in the sector” and could act as a dampener on innovation.
“Funds that have transformed into faster, more configurable systems and operating models will be better able to weather this regulatory storm,” SS&C said.
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