Jodie Hampshire

The Russell Investments Master Trust has grown with the addition of three corporate superannuation mandates.

Clayton Utz, Byrnecut Group Superannuation Plan – through Alliance partner Resource Super – and a leading reinsurer have awarded mandates to the Russell Investments Master Trust in recent months, as employers seek more personalised superannuation solutions for their staff.

The new mandates add around $285 million in assets to the Russell Investments Master Trust and provide an additional 2500 Australians with access to Russell Investments’ personalised superannuation program, GoalTracker.

Introduced in 2020, GoalTracker is a unique approach to the Australian retirement saving system that helps build the superannuation and investment experience around individuals’ retirement funding goals and personal circumstances.

This mass personalised approach to super is a first-of-its-kind in the Australian market. It provides fund members with individually appropriate investment strategies and can help determine suitable contribution levels for each member based on how they are tracking towards their retirement income goal – their personal funded status.

Russell Investments Managing Director of Australia and New Zealand Jodie Hampshire said the new mandates indicated that leading employers are increasingly seeking solutions which increase member engagement and personalise the typically commoditised superannuation experience.

“Leading employers are increasingly endorsing personalised superannuation and these mandates underline the importance of transitioning towards a superannuation system that puts real member goals and personal funded status at the centre of the super experience,” Ms Hampshire said.

“Retirement adequacy is personal, and over the past 12 months the retirement savings of Australians have been subject to a volatile investment and social landscape. As that landscape continues to prove difficult to manage for on a collective basis, personalised super solutions are becoming increasingly appropriate.”

GoalTracker technology factors in up to 10 individual data points, including a person’s age, super balance, salary, plus capital market forecasts. This data helps determine how each member is tracking towards their personal funded status. It can then customise the optimal asset allocation and glide path for each member, to ensure they have the best chance of reaching their goal.

“GoalTracker represents the next evolution of superannuation in Australia and we expect most super funds to adopt similar mass personalised solutions by 2030,” Ms Hampshire added.

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Jodie Hampshire

Russell Investments has launched Australia’s first goals-based superannuation solution, using mass personalisation and proprietary algorithms to make it possible for every Australian to access a tailored investment strategy based on their unique circumstances and retirement income goals.

The launch comes as Russell Investments released research showing that a personalised approach to asset allocation and voluntary superannuation contributions could substantially reduce the number of investors falling short of their retirement goal.

The study of the retirement goals of more than 8,000 Australians uncovered that a personalised approach could increase the number of investors categorised as on-track to their goal by nearly 70%, with higher projected retirement incomes for more than 85% of those analysed.

Called GoalTracker^TM, the ‘goals-based’ solution aims to tackle what Russell Investments identifies as Australia’s “real retirement savings gap”: the gap between the income that each individual needs to fund the lifestyle they want in their retirement, and what they are on track to achieve.

Russell Investments Managing Director, Australia, Jodie Hampshire, said that while the Australian retirement system is considered amongst the best in the world, policymakers continue to debate how to improve the Australian system.

“Our analysis shows that optimising asset allocations and contributions at the personal level can form a substantial part of the solution,” Ms Hampshire said.

Global trend to mass personalisation

GoalTracker is a significant breakthrough for the superannuation industry and a major evolution from ‘lifecycle’ funds, which mainly focus on a person’s age. Today’s super system sees most Australians defaulted into ‘one size fits all’ investment options, which apply a single asset allocation to all members, or an age-based cohort, and ignore the many pieces of additional personal information that could improve asset allocation at an individual level.

The GoalTracker solution factors in up to 10 individual data points, including a person’s age, super balance, salary, plus capital market forecasts, to determine how each member is tracking towards their retirement income goal  and to set up a customised asset allocation to ensure they have the best chance of reaching that goal.

GoalTracker draws on Russell Investments’ multi-decade work with some of the world’s largest and most sophisticated institutional investors. The firm has identified mass personalisation as a critical step forward, bringing the super industry in line with other sectors such as retail, entertainment and fitness, which use technology to offer people highly personalised customer experiences built around personal goals and preferences.

Ms Hampshire said the world’s largest investors have long understood the importance of matching their asset allocation to their unique goals and liabilities, and had the substantial resources required to do so.

“Large institutions invest for outcomes. Now, for the first time, everyday Australians can also benefit from an investment strategy based on their own unique funding goal and situation,” she said.

What’s the problem?

Understanding Australia’s “real retirement gap” is challenging due to a lack of national data on individual retirement income goals.

As part of the GoalTracker launch, Russell Investments today shed new light on the issue with the release of a whitepaper Making Super Personal. The paper draws on the analysis of the retirement goals and financial circumstances of more than 8,000 Australian superannuation members within the nearly $10bn Russell Investments Master Trust (RIMT) – highlighting the power of setting and tracking goals.

The paper also references a survey of more than 3,000 working Australians nationwide, identifying four key engagement hurdles each individual must overcome to make additional contributions to get on track to achieve their retirement goal. These include:

Hurdle one: Intent to engage and take ownership of their retirement

Hurdle two: Choosing a desired retirement lifestyle (income goal)

Hurdle three: Understanding how they are tracking to that goal, and

Hurdle four: Being aware of the actions required to achieve their goal.

The paper also highlights that those members who had used Russell Investments’ goal setting tools were 67% more likely to have made additional voluntary contributions, relative to those who hadn’t – reinforcing the significant impact goal-setting and tracking can have on engagement.

The analysis also showed that if individuals optimised their voluntary contributions, adding up to 5% of salary in additional contributions when tracking behind, or reducing voluntary contributions when tracking ahead, the number of members on track to their goal would increase by more than half.

The solution

Ms Hampshire said the answer to helping everyday Australians close their ‘real retirement gap’ lay with improving the two levers. Firstly, how much is put into superannuation, and when – the contributions. And secondly, how those contributions are invested over the course of a working life.

Ms Hampshire said that the key with voluntary contributions is increasing people’s engagement with their super. GoalTracker helps members build a personalised retirement income goal by choosing the lifestyle that meets their needs across eight lifestyle expenditure categories.

“By focusing the superannuation experience on personalising the lifestyle each person would like to have in retirement, GoalTracker makes superannuation feel more real, and members are more likely to take voluntary action to improve their likelihood of reaching their goals,” Ms Hampshire said.

The other major lever to improve retirement adequacy is asset allocation, which is widely considered the single most influential factor on investment earnings.

“By determining asset allocation at the individual level, GoalTracker can invest in more growth assets early in life, and more intelligently reduce downside risk as a member approaches retirement. This reduces the chance of a significant market crisis such as the outbreak of the COVID-19 pandemic wiping out a large part of their savings just when they need it most,” said Ms Hampshire.

“GoalTracker is unique in that once an individual has set a goal, it can do the hard work by implementing and reviewing their asset allocation quarterly and adjusting it on their behalf if necessary, as their financial circumstances and markets change,” said Ms Hampshire.

GoalTracker has recently been rolled out to more than 50,000 members of the RIMT as the MySuper option. GoalTracker has already attracted several new employers to join the fund and is also available as a white label option for other superannuation funds to use for their members.

The significance of mass personalisation as a major evolution for the industry is being recognised by independent associations and organisations locally and globally. GoalTracker has already been recognised with the ChantWest Innovation Award 2020, Best Member Engagement Innovation at the 2020 Super Fund of the Year Awards, and the winner of Pension & Investments 2020 World Pension Summit – Technology Innovation Award.

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Cornerstone Managed Portfolios respond to increasing adviser and investor preference for transparent, personalised investment solutions, and growing demand for lower-cost, actively managed portfolios.

Aligned AMP advice practice, Invest Blue, collaborated with AMP and Russell Investments to design and build the new offer, which includes four separately partnered managed portfolios.

The portfolios provide Invest Blue’s advisers and clients with access to transparent investment portfolios, tailored to specific client needs.

Shaune Egan, AMP’s Director Wrap Product, said the new offer reflects AMP’s ongoing commitment to firmly establish MyNorth as the leading wrap platform in the Australian market.

“Our strategy for MyNorth is anchored to three objectives – cost effectiveness, seamless administrative functionality and unrivalled investment choice.

“This new offer continues the delivery of this strategy, supporting advisers in providing clients with tailored, cost effective portfolios, constructed and managed by a leading investment manager.

“Advisers and clients will benefit from centralised trading teams and strong investment governance processes which minimise risk and support practice profitability,” Mr Egan said.

David Stephen, Invest Blue’s Managing Director, said “the new portfolios strengthen Invest Blue’s value proposition, providing clients with access to bespoke, high-quality, transparent investment options.

Jodie Hampshire, Managing Director of Russell Investments Australia, said “we are seeing increased demand from many financial advice licensees and large practices for independent, world class investments, packaged and structured to suit specific client needs”.

The new offer expands MyNorth’s partnered managed portfolio range following the launch of portfolios with advice practice, the Weinberg Private Group and other independent advice practices in 2019.

Cashflows on the North platform increased 52 per cent to A$2.0 billion in the first half of 2020, driven in part by continued inflows from external financial advisers, which increased by 39 per cent to A$700 million.

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The research comes as fear around the erosion of Australia’s retirement savings intensifies, with the latest figures from Chant West revealing the average growth (balanced) fund dropped 9% in the month to March 31 and 10.1% for the March 2020 quarter. While the Australian share market has since rallied to record its best month since 1988, April was still characterised by whipsawing volatility.

Russell Investments surveyed more than 3,000 working Australians* in January this year, prior to the market collapse, to gauge their perceptions of investments within superannuation.

A topical misconception was the belief that super funds automatically de-risk to protect members from potential losses during a market downturn – a view held by two thirds of working Australians surveyed.

Meanwhile, more than a third (37%) believe their fund already manages their investments based on their own personal circumstances – even if they do not actively choose how their super is invested within their fund.

Critically, the research found the majority underestimate the importance of asset allocation in driving returns. Just one in five people correctly identify asset allocation as one of the most important determinants in achieving adequate super savings for retirement – showing a lack of connection between how super is invested and retirement outcomes.

Room for improvement

Managing Director of Russell Investments in Australia, Jodie Hampshire, said the impact of COVID-19 had shed light on how exposed many Australians remain in today’s modern defined contribution super environment – but it also gave clear direction on how we can do better.

She said enabling members to adopt more individual, goals-based investment strategies was an emerging path for global retirement plans to help members better manage their investment choices – and thus retirement outcomes – through inevitable market cycles.

“As an industry we can, and should, be doing more to help investors navigate this climate of increased uncertainty,” Ms Hampshire said. “For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy. Therefore, having the right asset allocation at the right time is critical – members who don’t take on enough risk when they are able to could see their super balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.”

Ms Hampshire said that asset allocation is often overlooked in industry discussions around retirement income adequacy compared to other considerations such as fees, which have a smaller influence on retirement outcomes.

“Australian super funds – including the team at Russell Investments Master Trust – work hard to provide members with the information and education they need to make the right investment decisions. However, our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choice at all. This is particularly the case in times of severe market uncertainty where strong emotions and behavioural biases have a heavy hand in decision-making,” she added.

Other key findings from the research include:

• 67% of those surveyed do not know how their super is invested or leave it to their fund’s default approach.
• More than one in five (21%) did not know they could choose their investments in super.
• Those who have made an active investment choice are significantly more likely to have also set a goal for the amount of super they want to save for (or spend in) retirement.
• For those who have made an active investment choice within their super:
  • Only 30% believe they have the right investment experience to pick their own investments.
  • Meanwhile, 28% still pick their own investments, despite admitting they don’t have much investment experience.
• When making their investment choices, one in four rely on help from a friend or relative with financial knowledge (25%). Meanwhile, only three in ten (30%) say they reference information from their super fund.

Global trend to ‘personalised’ retirement saving

According to Ms Hampshire, even Australia’s mandated super system will struggle to deliver adequate retirement outcomes for many Australians. She pointed out the figures from the World Economic Forum which revealed the nation has a retirement savings gap of US$1 trillion, expected to rise to US$9 trillion by 20501.

“A key weakness of our current system is its inability to deliver investment strategies that address individual retirement goals. Super funds are serving up one-size-fits-many approaches to investing that might look sensible on average, but in the real world, nobody is average,” she said.

“While MySuper has helped nudge people into higher growth default options, the contributions of a 25-year-old entering the workforce might still be invested in the exact same way as a 62-year-old nearing retirement,” she said.

The introduction of lifestyle or target date funds has been a step in the right direction, however age-only strategies are designed for a group of individuals, instead of delivering an optimal outcome for each and every individual, Ms Hampshire said.

“Our next challenge is to efficiently deliver an approach to asset allocation that is more personalised to an individual’s own retirement goal, and to their particular financial situation.”

Ms Hampshire said the move to more personalised super would emulate other industries such as the retail and health and wellness sectors, which have harnessed data and technology advances to offer a more personalised delivery of products and services to meet the unique needs of individuals.

“Our global work in retirement planning shows the same approach can, and should be, applied to superannuation. In fact, Russell Investments has been working hard to solve how we can bring the same asset allocation technology used with the world’s largest liability driven investors to improve investing within super for individual members,” she said.

“Ultimately, we see that personalised, goal-based investing in super is the next big step to helping even more Australians achieve the retirement lifestyle they desire.”

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[1] World Economic Forum, Investing in (and for) Our Future, June 2019 http://www3.weforum.org/docs/WEF_Investing_in_our_Future_report_2019.pdf

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The [Russell] report comes at a critical juncture in today’s environment where articulation of an adviser’s value is critical.

Global asset manager Russell Investments has launched a ‘next generation’ suite of multi-asset, managed accounts. This offering is a direct response to growing adviser and investor preference for more transparent, personalised investment solutions. The solution answers the demand for more ‘active’ managed accounts at a cost-effective price point.

According to Industry estimates, the Australian managed account marketplace now has close to $65 billion in funds under management, with further growth expected over the next three years. This surge in interest is being driven by a range of benefits including transparency, direct ownership of the shares portfolio and the ability to manage investors’ specific tax circumstances.

Commenting on the launch of the new managed account offering, Managing Director of Russell Investments, Australia, Jodie Hampshire said:

“Our research shows Australian advisers continue to be faced with a limited choice between two key structures; a highly active managed account at a premium price point or a passive managed account at a low price point. This next-generation multi-asset, managed account fills a key gap for Australian advisers providing a dynamic core at a cost-effective price.”

Comprised of three major components – direct Australian shares, unconstrained multi-asset strategies and ETFs – the Russell Investments Managed Portfolios suite combine dynamic asset allocation and active management, complemented by passive management and factor investing for diversification and to provide a competitive price point.

“Dynamism is important in today’s investment environment. However, it isn’t about tactically adjusting on a regular basis but instead it’s about having a rigorous process in place to identify risks and opportunities, coupled with the capabilities to respond rapidly to new information and act on it in a timely fashion,” said Hampshire.

Furthermore, Hampshire said Russell Investments have constructed its Managed Portfolios suite to align with four traditional risk profiling frameworks advisers typically use with clients – at a compelling price – the investment fee from as little as 0.65% per annum.

“While our Managed Portfolios solutions are designed around specific investment outcomes, the real value of an adviser lies in helping investors achieve their financial goals – not tracking or beating a benchmark,” said Hampshire.

The value of advisers in the current landscape

Demonstrating its support for the adviser community, Russell Investments recently released its second annual Value of an Adviser Report. The report looks holistically at the real value advisers deliver for their clients—from the knowledge and expertise required to help clients build personalised portfolios, to the support they provide when market conditions change. The report also provides insights on a range of additional wealth management services such as tax and estate planning.

According to the report, quality financial advice in 2019 contributes, at a minimum, 4.4% per annum. of value to clients’ portfolios.

In the report, Russell Investments outlined five key elements that make up the value of advice including annual rebalancing, preventing behavioural mistakes, planning and additional wealth management services, and tax-smart investing.

According to Hampshire, the report considers the full equation of an adviser’s services, overriding the common misconception that advisers are simply investment managers selecting investments for clients with the aim of achieving a certain level of return.

“Over the past 20 years, we’ve worked with top advisers around the world including the US, Canada, UK and Australia. This report reinforces the value of advisers, which goes beyond investment-only advice and is derived from both the technical and emotional guidance they provide. For this reason, we believe advisers have never been more valuable in Australia,” said Hampshire.

Of the elements quantified by Russell Investments, an adviser’s ability to help investors avoid behavioural mistakes such as chasing past performance or reacting to short-term market volatility was the largest contributor, adding at least 1.9% per annum of additional value for their clients’ portfolios.

Hampshire said the report comes at a critical juncture in today’s environment where articulation of an adviser’s value is critical.

“The overwhelming majority of clients in Australia do benefit from quality advice. Our report offers a memorable and repeatable framework to assist advisers in clearly and confidently demonstrating the value they deliver to clients,” said Hampshire.

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The Russell Institutional Business is focused on providing investment solutions and consulting services to superannuation funds and other institutional investors, and is actively seeking new alliances to build customised multi-asset funds, or align them with Russell’s existing suite of outcome-driven, multi-asset solutions.

According to Russell Chief Executive Asia Pacific, Alan Schoenheimer, Ms Hampshire brings a deep understanding of the Australian institutional market and will be instrumental in building the firm’s alliance approach by collaborating with a much broader set of institutional clients.

“Russell is focused on driving relationships with local insurance companies, industry funds, defined benefit funds, non-profits and corporate funds – helping them provide tailored solutions for members in the current challenging market environment. Jodie will play a critical role in highlighting to local institutions the full power of the Russell proposition,” Mr Schoenheimer said.

“Investors are facing a fixed income dilemma. Be they pension funds, life insurance companies or retirees, everyone has the same problem – fixed income isn’t generating enough yield.

“Russell’s approach in designing modern multi-asset portfolios responds to this dilemma and addresses the question on all investors’ minds: How do I get equity-like returns without the volatility of equities?

“Russell has focused its capabilities on providing clients with actively managed, outcome-oriented, multi-asset portfolios that offer real diversification by using richer components and being more adaptive to changing markets.”

Russell launched its alliance approach earlier this year announcing its first partnership in the retail advice market with Australian retail financial planning group Matrix Planning Solutions. Working with Russell, Matrix launched its PartnerShip Funds in February – five actively managed multi-asset portfolios designed to deliver different outcomes depending on the investor’s life stage and income needs.

Return to Russell

Ms Hampshire joins Russell from Mercer where she was Chief Operating Officer, Investments Pacific. The appointment is a return to Russell for Ms Hampshire who has a long background with the company, having served in roles in both Australia and London. She commenced her career with Russell in 2000, with her most recent position being Assistant Director, Product with Russell Investments in London, a role she held until 2006.

“Jodie brings a highly diverse global skill set to the firm, gained in her previous roles with Mercer and Russell. Her experience spans business strategy and business financials, investment consulting, product development and institutional sales, so she is well placed to drive relationships with institutions and forge new alliances,” Mr Schoenheimer concluded.

Ms Hampshire will start with Russell Investments on 14 August.

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