Some companies with in-house super funds have simplified how their funds operate by employing an implemented consultant.
By Christopher Page

KEY POINTS
Implemented consulting is a response by asset consultants to the changing needs of corporate super funds that does not require the corporate fund to close down. Most implemented consulting services offer a mix of beyond investment member services. Depending on the reasons for outsourcing, implemented consulting may be a reasonable compromise.

Implemented consultants in Australia manage around $11 billion in superannuation assets on behalf of 60 companies and their in-house super funds. But what is implemented consulting and how is it different to regular asset consulting? To understand implemented consulting we first should understand its origins and why it evolved from regular asset consulting.

Asset consultants are advisers used by large scale investors - usually super funds - to help them devise and implement their investment strategy, select fund managers and monitor their investment performance. Asset consultants became a serious force in the late 1980s with the introduction of Award Superannuation.
They have become so popular among super funds that they now control nearly 90 per cent of superannuation assets and significantly influence which fund managers win the rights to manage those monies. They are the most influential group of advisers in the superannuation industry.
They are clearly a force to be reckoned with.

The problem for asset consultants though is that much of their regular business is under threat. This is because of the dramatically increasing trend towards companies outsourcing their super funds, the continual government threat to introduce Choice of Fund legislation, and the daunting new proposals for super funds under the Financial Services Reform Act introduced in March 2002 are driving more and more companies away from running their own in-house super fund.

And they are responding by re-inventing their businesses by developing either their own corporate master trusts or implemented consulting services so that if a client super fund does elect to outsource, the consultant will still be likely to win that business but within a different aspect of their advisory business.

Implemented consulting is somewhat more subtle than a corporate master trust. When a super fund joins a corporate master trust it closes - in legal compliance terms - and all the members simply become members of the master trust. However, when a super fund employs an implemented consultant - often the implemented consulting service of their asset consultant - the fund effectively delegates the role of selecting fund managers to the consultant, so the fund is in theory more free to focus on other activities such as member reporting, developing new services and simplifying its operations. It is not unlike a super fund outsourcing its administration functions.

A good example of how some super funds have taken more advantage of their implemented consultant is to "bolt on" the implemented consultant's investment options to their own super fund to smoothly and quite dramatically improve their member investment choice offerings.

Apart from investment services most implemented consulting services also offer a mix of member or 'beyond-investment' services and in this way implemented consulting services can almost be viewed as highly customisable master trust-like solutions.

Examples of these services are asset administration, call centre support, web services, and investor education. Most implemented consulting services also have the ability to take over the in-house super fund's trustee responsibilities. It is clear then implemented consulting is really a spectrum of services rather than a "one size fits all" package.

The intriguing question though is why have some large companies looking to outsource their super fund chosen an implemented consultant rather than a corporate master trust or an industry fund.

Research conducted by Rainmaker Information has found that large super funds have often outperformed the regular performance benchmarks due to their different risk postures and so believe they have investment needs that master trusts and industry funds can not easily meet. And this is why in some recent examples of outsourcing tenders, master trusts and industry funds competing for this business have offered to develop specific investment options exclusively for the target client.

If the reason your company is thinking about winding up its in-house super fund is that the investment process is becoming too complex, then implemented consulting may offer you a reasonable compromise.

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