Consultants used wisely can add tremendous value to your company superannuation arrangements. But poorly used, they will waste your time and waste company resources
By Christopher Page

KEY POINTS
There are two types of advisers: financial advisers and consultants. Make sure they understand your requirements but make sure you maintain control over the process. You are the decision-maker and the consultant or adviser is not. Understand the charges and fees for the review and ongoing management.

You want to outsource your company super fund, choose a default super fund for your company, or review how your current super fund is going?  What do you do now? The secret is to create a process that puts the power back in your hands.

The decision to outsource has probably been driven by a need to reduce management and employee time spent on superannuation issues and to streamline the administration. As the employer you are also probably looking for a superannuation solution that provides employees with some choice, information and investment education. And to limit your legal risks, you want the super provider to be able to handle your employees' questions. And if you have already outsourced you obviously need to make sure the fund is still the best fund for your company's needs.

What are your employer needs?

As the employer you will have many issues you want covered when considering a new super fund. Some of these will be administrative ease, electronic contribution payments, quality of relationship management, ability to meet agreed service standards, stability of the product's business administration and software platform, proven investment processes and the existence of internal controls to safeguard employer and employee interests.

In some cases, the existing employer fund may even have a defined benefit structure that needs to continue. If this is the case the ability of the super fund to manage defined benefits is paramount.

What are the employee needs?

Employees are consumers and consumers expect high levels of services that are flexible, high quality and well priced. So any super fund your company chooses has to satisfy their needs as consumers as well as your needs as an employer. A simple example is that it is now standard for members to be able to access their super information 24 hours a day 7 days a week either via the internet or via phone. Super funds that can not do even this should be by-passed.

Given that many outsourced superannuation arrangements provide members the ability to choose their own investment strategy, the existence of a good standard of member education is vital along with a flexible range of investment and other benefit options. Most importantly when an employee leaves the company or has to make a claim, it is also crucial that the benefit administration service is run smoothly.

How do I select a consultant or adviser?

A good way to start is to talk to other companies about the processes they undertook when selecting their superannuation provider, and contact your industry association or a superannuation industry association. This will help you create a shortlist of consultants and advisers. Then interview them about their services and their corporate superannuation experience. Obtain references from previous clients - checking attitude, process and corporate super credentials.

Then ask the adviser or consultant to put together a proposal on what they are going to do for you, how long it will take and how much of your time it will take.
Intuitively you will know your needs, so you need to ensure that you communicate these clearly to your consultant or adviser. The role of the adviser is of course to extract this information from you and put it in a language that makes it easy for the super fund to respond.

While many employers have similar needs (that's why so many of products provide similar core services) there will be differences and it is important that these are communicated up front. The difference in most services however, is in the cost and consistency of delivery - and this is what matters most to employers.

Maintaining control over this process comes from ensuring that the needs of both the employer and employee are clearly stated up-front and that there is clarity and transparency in the process of your adviser or consultant. Superannuation decisions are no different to other business decisions and they need to be handled in the same way.

And make sure you maintain control over the process. To do this, understand that you are the decision maker and they are only the adviser. And of course expect that all consultants and advisers will charge you for their services.

Advisers and consultants add value because they summarise, standardise and compare the services and benefits of each super fund into a format that makes it easy for you to understand, manage and react to.

Helping you through the minefield of selecting your new super fund for your company requires skill, not with just investment knowledge but also in the structuring of corporate superannuation arrangements. This is not as simple as arranging personal superannuation as it involves extra skills and understanding that may challenge an inexperienced adviser.

Consultants versus financial advisers

There are two types of advisers: financial adviser and consultants. As well as general financial adviser expertise, some, but definitely not all, financial advisers have experience in corporate superannuation. The other type of adviser comprises specialised corporate superannuation consultants that focus solely on a company's superannuation needs. These are sometimes called superannuation tender consultants.

There are some fundamental differences between these two types of advisers, and they also charge quite differently for their services.
Financial advisers tend not to charge a straight dollar fee for their services because they are remunerated via a charge on the assets of the fund. The employer may pay this charge directly, alternatively it may be a deduction from the assets of the fund when it is transferred. If deducted from the super fund assets it is effectively directly attributable to each member and may appear as a deduction from member accounts.

There may also be an ongoing commission structure, which means that the adviser may be paid an ongoing "trail" fee - or commission - afterwards out of additional contributions and roll-overs for the life of the fund.

Consultants, on the other hand, will usually provide a fixed quote prior to commencing work. The fee quote takes into account the fund's complexity, management of the tender process, meetings and the final report rather than the value of the assets. Depending on an employer's attitude to the situation this fee may be paid by the employer or charged to the fund. Note that some financial adviser may also charge in this way and some may even still collect a trail commission.

Financial advisers also may be linked to particular superannuation products, adviser groups or financial institutions. If this is the case, just be sure you understand these relationships as they will obviously influence how you should react to your adviser's advice. In some cases then, this can mean that by the time you have chosen your financial adviser you may have effectively already chosen your product. Consultants though usually develop a short list of super funds based upon your agreed criterion.
Regardless of whether you use a financial adviser or a consultant, you should try to understand how their recommendation or short list of possible super funds is compiled. This helps to avoid being maneuvered into the financial adviser's and consultant's preferred contenders as they may sometimes be paid commissions, short-list appearance fees, or finders fees. Indeed before employing your consultant or adviser you should require them to categorically declare any explicit or implicit relationships they have with any super fund.

And don't be afraid to ask the financial adviser or consultant to include a particular product that you want to consider along with all the other products. Remember that they are working for you and so you can define the terms of how they help you. If they won't co-operate with you, sack them and choose another consultant.

Maintain Control

Does using a financial adviser or consultant mean you lose control of the process? No. But if you have lost control then the process has failed and it is likely you will have to go through it all over again.

Ensure that you review the request for expressions of interest sent to superfunds and that you are comfortable that the selection criterion stated by the consultant matches your own selection criterion. Eg, the consultant may ask for the provider to be able to conduct seminars out of hours when you as an employer are quite happy to have member education delivered during working hours, or the consultant may want much more investment choice than you think is necessary.

If your company still operates an in-house corporate super fund, it is the existing trustees' decision as to which provider will be awarded the contract to manage the existing superannuation fund assets. In that case, you as an employer are merely assisting in the process. Remember here that the trustees run the fund, not the employer. Failure to understand this could cause you to act improperly and leave you open to severe penalties. But also don't forget that under Super Guarantee legislation the employer has the right to decide to which fund future employee super guarantee contributions go.

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