ING Direct’s plans to launch an online retail superannuation product are intriguing, considering the lack of interest shown by the average person in actively steering their savings strategy.
More so, since the direct savings bank apparently will offer the new product only online and through call centres, but not through its third-party distribution networks.
The success of, presumably, similar low-cost retail super products, such as BT Super for Life and AMP Flexible Super, has come to a great degree from the large-scale distribution operations Westpac and AMP have.
Instead, ING Direct seems to rely on its cost-aware and permanently online clients, who were attracted to its savings and mortgage products.
The question that comes to mind is whether people are similarly keen to reduce costs and switch from their existing arrangements when the rewards are decades away.
After all, clients who seek out the best savings or mortgage rate on the Internet are often driven by a need for instant gratification.
Will ING Direct’s product be interesting enough to entice them to switch?
A spokesman for the firm acknowledged the answer to that question would determine the product’s success.
But he also pointed out ING Direct’s track record of introducing successful online products and that the issue had been given due consideration.
ING Direct is still very secretive about the final shape of its super product.
Speculation suggests the product will be a MySuper-style product, but in the few sentences the company has uttered about the new vehicle it has emphasised control.
“Our customers have been asking us if we can do for super what we’ve done in savings, home loans and transactional banking, so we are developing a retail product that gives customers value and puts their investments back in their control,” ING Direct chief operating officer Anne Myers said.
Was the use of the C-word coincidental or was it a reference to the self-managed superannuation fund (SMSF) sector?
ING Direct has already made successful forays into the SMSF sector through its cash products.
The company also provides online savings accounts to clients of SMSF operator Esuperfund.
Esuperfund has among the lowest SMSF service fees in the industry, clearly targeting the retail sector.
If ING Direct is indeed launching a low-cost SMSF-style retail product, this would certainly provide some food for thought.
Until now, the relatively high balances required to make SMSFs viable has meant that predominantly financially literate people have been enticed to establish such a fund.
But commoditising SMSFs has the potential to place these products in the hands of people who are more likely to do damage to their contributions than to generate growth.
It is an inherent danger of the defined contribution system, where all risk is transferred to the individual; the danger MySuper was meant to address.
But perhaps ING Direct’s new product, which will be launched in the third quarter of this year, is far less exciting than all this.
Time will tell.
