A new update to Xplan’s WealthSolver tool, available from July 1st, attaches coloured flags to any superannuation fund that has failed APRA's annual legislated performance test.
The new flag feature saves advisers time spent researching how various super funds have fared in the testing process. Full visibility over underperforming funds makes it easy to avoid them or make recommendations on switching if necessary. By making clients aware of the test results and providing some context you can easily help them weigh up their options.
This update aims to give advisers greater confidence in the super funds they’re recommending, knowing they’re acting in clients’ best interests, armed with up-to-date market information.
How does a superannuation fund fail the test?
Introduced by the Treasury Laws Amendment (Your Future, Your Super) Bill from 2021, the APRA testing requirement currently assesses past performance of three types of investment options: MySuper, non-platform trustee-directed products (TDPs) and platform TDPs.
It has two components: one that assesses the net investment return against a tailored benchmark over nine years, and a second that compares the latest year of administration fees and costs charged to an industry benchmark.
An investment option fails the performance test if its assessment metric is below a threshold of minus 0.50 percentage points per annum. APRA provides more insights into performance testing here.
Any investment option that fails the performance test must inform its members in writing. An investment option that fails for two consecutive years must be closed to new members.
The testing supports APRA’s strategic objectives of protecting Australians’ retirement savings and holding trustees to account for the investment performance they deliver and the fees they charge to members.
The benefits of flags for advisers
Using WealthSolver, advisers can easily compare key data on over 890 superannuation, pension and investment products, saving valuable time. Now advisers are also able to see any flags in their plan research and modelling screens and know immediately that these options have failed the performance test.
An orange flag will appear for options that have failed the APRA test once. A red flag will appear for any option that has failed multiple times. These options will also display as closed/restricted. The compliance report that's available when modelling will also reflect any failed options that may be present.
With APRA’s performance test expected to expand to all Choice funds in the future, these flags free up advisers’ time to focus on specific client needs.
Advisely Team