Industry funds still a service provider honeypot

Major industry superannuation funds may have been leading the way on insourcing investment management, but data provided to a Parliamentary Committee has confirmed industry funds are the greatest users of external service providers.

What is more, the use of external service providers by industry superannuation funds has been growing representing the bulk of $3.7 billion expended by the funds while their use by retail funds has been relatively static and actually declined by June, 2021 and June 2022.

According to data provide to Senate Estimates by the Australian Prudential Regulation Authority (APRA) the proportion of external providers utilised by industry funds rose from 42% to 47% between June 2020 and June 2022, compared to a decline from 38% to 36% for retail funds over the same period.

The data had been provided by APRA in response to a question on notice from Tasmanian Greens senator, Nick McKim who had asked the regulator for a breakdown of the types of service providers used by superannuation funds.

The APRA analysis revealed that the use of external service providers by superannuation funds vastly outweighed the use of internal providers by a factor of nearly six.

As well it showed that while the use of internal advisers had been in slow decline between June 2020 and June 2022, the use of external providers had actually increased by 9%.