Cover Story: Andrew Moore

Redesigning the game

Andrew Moore leads one of the more successful superannuation challengers. He talks to Kanika Sood about growth opportunities ahead for Spaceship.

Andrew Moore remembers reading about Spaceship in the newspapers in late 2017.

The superannuation fund, which was targeted at millennials, had already made a splash in 2016 when Atlassian co-founder and billionaire investor Mike Cannon-Brookes ploughed some of his family office money into the startup - and his retirement savings into the fund.

At the time, Moore was taking a break after a decade at Westpac and looking for opportunities in fintech in a mid-life sea change as he turned 50.

His last role at Westpac was revamping the New South Wales branches. He had never worked in superannuation directly, unless you count training Westpac's branch staff on BT's Super for Life retail offering, but he did have decades of experience in mergers and acquisitions and running businesses.

"Of course, at that point in time, I didn't know I was going to become involved with the company because it's only  December 2017," Moore says.

"I remember thinking to myself, this is really interesting what this business is looking to do, because they were absolutely on the money as it relates to younger people...recognising that they were thoroughly disengaged with superannuation."

Moore's call from Spaceship didn't come for a few months.

In May 2018, as AirTree Ventures and some other Spaceship shareholders looked to install an independent chair, they chose him.

"You know, I can't describe myself as someone that has grown up in the startup world or in the venture capital world, or the world of smaller scaling businesses," he says.

"I nonetheless had a really good understanding of what you need to do to build and grow a challenger brand that was looking to be digitally disruptive."

He eventually became the chief executive in August 2019, as Spaceship's last remaining co-founder Paul Bennetts left the business [he still retains a shareholding]. The other three co-founders had left in the early stages of the business.

Spaceship is what gets called a "challenger" or "disruptor" superannuation fund - newer superannuation offerings that are looking to break the industry-retail duopoly by focusing on younger and digitally savvy members.

It is not the only one.

As of June 2020, there were about 23 of them, according to Rainmaker Information. Most new superannuation funds are geared towards younger investors, have choice offerings rather than MySuper products, and use a third-party responsible superannuation entity (RSE) licence.

While they were growing seven times faster than the broader market, their assets totalled only $2.5 billion or less than 0.09% of the then $2.7 trillion superannuation systems - proving they still have to earn their "disruptor" label.

So far, they have attracted less than 2% of the $140 billion in total superannuation assets held by millennials. Industry funds like Hostplus, Rest and AustralianSuper still own the bulk of younger accounts.

Most disruptors have failed to gain traction. A few, like Zuper, have folded while another player Grow Super pivoted away from a direct-to-consumer super offering  towards providing back-office services to other superannuation funds.

Spaceship is the third largest of the cohort, behind Future Super and Virgin Super. Together they held about 68% of the total assets in disruptors.

In the four years since it started Spaceship has  grown its superannuation fund to $470 million and 9,500 members at May end. In May 2018, it launched a low-cost lineup called Spaceship Voyager which now has $440 million in assets and 175,000 users - and is an important source of customers for the higher margin superannuation business.

The person in charge is Moore.

He arrived at superannuation via roles in mergers and acquisitions, home lending and retail banking.

Moore grew up in Western and South Australia, as the family moved for his father's job in mining.

Eventually, the Moore patriarch switched careers to work in commercial lending for State Bank of South Australia, which morphed into Bank SA - this was a part of younger Moore's remit in his St George career.

But his first job was as a chartered accountant at Coopers & Lybrand, which merged with Price Waterhouse in 1998 to create what is now called PwC. He then worked at Bankers Trust in its mergers and acquisitions and corporate finance teams in the early 1990s.

Taking a break to study an MBA at INSEAD in France was the springboard for Moore to switch from investment banking to general management.

He joined General Electric next and worked on financial services acquisitions for it across Europe. This led to a senior management role at British lending and mortgage business First National, which GE had acquired during Moore's time there.

"My career moved more into general management because what I found is that working on deals can be tremendously exhilarating but the challenges associated with leading a business, I think are a much more all embracing ones, where you're having to think about all of the complexities of scaling a business, managing risk, managing technology, and interacting with customers," he says.

Moore returned to Australia to lead GE Money's reportedly $400 million acquisition of Mark Bouris founded Wizard Home Loans, which at the time had a mortgage book of $4 billion.

"That was a very disruptive business in the home lending space. And the opportunity to work on that acquisition and ultimately to be the managing director of the business was great," he says.

He left GE in 2008, for St George's Bank soon after Wizard Home Loans was bought by John Symond's Aussie Home Loans. His new employer was also getting bought out, by Westpac in an $18.6 billion all-scrip merger.

At the time that Moore accepted the job, he didn't know the merger was on the cards.

"I remember waking up one morning and seeing that St George was about to be acquired by Westpac and wondering what that was going to mean for the role. But I think the good news out of that was it created a lot of opportunities for me."

Moore spent the next nine years there, across roles that included running the retail bank, and serving as St George's chief operating officer.

In some of these, he worked in St George's digital capabilities in sales and services - experiences that he says drove home the end of old-school banking.

"That helped me understand that certainly the future of banking and much of financial services was  clearly going to be delivered digitally. And that world of old-style branch-based banking [and] in some ways of large voice-based customer contact centers was going to change as the opportunity for customers to interact with the bank digitally improved," he says.

At Spaceship, digital has been the only way to go. Its products and services are offered exclusively digitally, and the company maintains a small office in Sydney's Chippendale.

Moore is markedly different from other superannuation chief executives.

He doesn't mention "member interest" once in the hour-long conversation this profile resulted from, and is happy to chat about client acquisition channels - a taboo subject among industry fund executives.

He is also not fussed about the government's proposed [at the time of print] plans to staple members to existing funds, stop inflows to underperforming funds, and subject superannuation funds to a best interest financial duty.

Most of these don't apply to Spaceship, as its fund is classified as a choice product.

On acquiring superannuation clients, Spaceship has shifted away from chasing superannuation leads to using its low-cost managed fund product as the first hook.

"So it could be that it costs you $400 or $500 to acquire a superannuation customer through a digital direct consumer channel. Then in terms of the value of that customer over time, it will depend a lot on what the fee structure is, how long the client stays and there's opportunity to recover that [acquisition] cost," he says, adding Spaceship's members being younger makes them more likely to stay for longer.

"One thing that we're finding with the model that we've now built with Voyager, we acquire a customer at a much, much, much lower cost than what it costs to directly acquire a superannuation customer."

A Spaceship super customer comes into the business either via Spaceship Voyager, which is a more accessible entry point for them, or via organic marketing. The business keeps its marketing spend on super low.

Spaceship Voyager's three drawcards are that it waives fees for the first $5000 invested, charges index rate fees afterwards and is tilted towards tech stocks the market loves.

Moore says the low free structure will stay for now but is constantly reviewed.

"We are aware that there are competitors in the market that charge differently to the way that we do. You might call them a subscription-type fee. We don't have any current plan around our fee structure, [but it is] something that we're constantly monitoring," he says.

Voyager in itself, draws clients from three main channels: nearly half is organically generated via search engine optimisation, about a third comes from existing client referrals (they get $5 or $10 to bring in a friend or relative), and the remaining is via paid digital advertising through Google and Facebook.

In the latter, Spaceship is no different from pureplay online retail businesses like Kogan, Temple & Webster and Adore Beauty. They spend about nine to 12% of their annual sales on paid marketing - a strategy that is slammed by many small cap investors as being too dependent on third parties and loved by others who see it as investing in the business.

Moore says Spaceship's ballpark marketing spend is higher than the 9-12% range, and there is room for it to go higher.

"We are still building our brand...we don't spend more money if we find that the incremental spend is giving us a diminishing return in terms of additional business," he says.

In terms of funds under management, Spaceship is inching towards $1 billion, but it doesn't expect to break even on the cashflow until 2023 or five years in its life.

Meanwhile, Moore, with his experience in mortgages and acquisitions, is open to growth opportunities.

"I think the most logical of those products initially will be one, not so much on the banking or credit side of the balance sheet, but more on the investing or saving side," he says.

"In our customer surveys, we often get feedback, where people say 'help me save for a home'; or 'help me with investing products, where I can make some of those investing decisions myself [via] a broking platform', rather than the managed funds we have," he says, hinting a mortgage broking helpline may also be a future business unit.

Spaceship is open to acquiring other superannuation funds, only if they don't distract from the core offering.

"Sometimes it can sound like a great idea to have smaller players as part of an aggregation play. But I think the concern for us is it may just distract from a more significant growth opportunity that we've got by continuing to build out on this business model that we've got with  Voyager," he says.

On the way, Spaceship has also had a few brushes with the regulator. In 2018, Australian Securities and Investments Commission asked it to clean up its website of claims its GrowthX option "measures compnies" when 79% of the fund was tracking an index without any quantitative analysis. ASIC also handed it and trustee Tidswell fines of $12,600 each.

The prudential regulator, APRA, rebuffed Spaceship's appliction to get a RSE licence which Moore says it has since dopped considering until it cracks $1 billion.

For the future, Spaceship has its eyes on building up to a million young Australians as its clients, which by Moore's estimate, would put its total assets at $20 billion and could happen in less than a decade.

"We want to create a Spaceship-first space," he says.

"What I mean is if someone were to ask someone, 'Hey, Andrew, what do you [do] about investing?' the response from that person would be, 'Spaceship'.

"That's the type of branded relationship and connection that we're looking to build with all of our customers. So, we would like to feel that we're on our way towards having a million customers who feel that way about us and I think at that point, the level of funds under management across both of our products  would be in excess of $20 billion." fs