- Funds must capitalize on the member experience to future-proof themselves, especially in the time of fundamental change
- Funds must turn to trusted partners who can offer customized advisory models and help design product covers that consider the superannuation economy’s complex nature. This will help increase member outcomes in the end.
- Partner organizations can help funds by navigating them towards maximum digital outreach. Whether members choose to communicate through social media channels such as Twitter or Instagram, super funds can capture these subtleties, understand member behavior, and enable intelligent and effective decision-making.
In a move to reduce costs to Australian superannuation members, the Morrison Government has handed down the latest budgetary reforms that mainly focus on fund stapling and benchmarking using the YourSuper tool. Funds now need to carefully examine their distribution strategies with an overall focus on attracting new members and improving their experience — across all stages of the retirement saving spectrum. Amidst this change, everyone from funds to members, administrators and trustees are looking for clarity and support. In 2021, this has easily ranked as a priority for all of us.
The imminent need for fund stapling
The keynote speaker, a renowned consultant and advisor in the Superannuation industry, Stephen Huppert, addressed the big elephant in the room: fund stapling.
He quoted statistics to support the government’s decision and said, “Australians are paying $ 450 million as unnecessary fees to maintain six million redundant accounts. Fund stapling simply means that no new super account is opened automatically when an individual starts a new job – unless the employee does not already have one. The employer needs to pay super to their existing fund.”
Stephen Huppert reiterated how super money will now follow the member wherever they go—a move to avoid unintended creation of multiple accounts.
The changing rules of engagement
Sensing the impact of this announcement on funds, Stephen said, “Acquiring new members and retaining existing members will be hard for funds that do not ensure members are engaged optimally. Funds need to pay enough attention to all the online interactions they have with their members.”
He also added how these fundamental changes will require funds to rethink their insurance and product design capabilities to meet the needs of their members.
Here is a three-pronged approach for funds to survive and thrive with these changes:
- Competitive member fees: The first step is to reduce member fees. Funds must be transparent about tiered fee structures or performance fees.
- Customized insurance plans for high-risk job sectors: Funds need to help members select competitive insurance plans customized for high-risk jobs in industries like healthcare, mining, and also for low-risk jobs. In a post-COVID world, funds need to inform members about updates such as life insurance and disability covers that directly impact the insurance premium amount.
- A conscious engagement with millennials: Stephen encouraged funds to ramp up their efforts by personally engaging with millennials; Katja Forbes, from Wipro’s Design IT team echoed his sentiments. She emphasized that funds must actively learn to understand an average Australian millennial’s view on ethical investment, green-labeled investment options, responsible banking, and more. From 2007 to 2017, the share of a millennial in super fund balances went up from 6.4 % to 14.6 %.
“It’s time to treat millennials as conscious consumers of the superannuation industry.” - Katja Forbes
The new chapter with YourSuper tool
After fund stapling, the subsequent discussion was on fees and comparisons associated with the YourSuper Tool, led by the second keynote speaker Michael Quinn, Executive Director, QMV. He spoke on how the YourSuper tool will help members select a better performing fund.
The government forecasts $3.3 billion in higher member balances or $17.9 billion savings in a decade if members continue to use the YourSuper tool successfully.
YourSuper tool is an online tool that will provide a list of MySuper products—top-ranked by fees and investment returns—to help Australians make a well-informed decision about where their super goes. Available from 1 July 2021, the tool helps members compare and switch funds easily.
The Australian Prudential Regulation Authority (APRA) is tasked with benchmark tests on funds’ net investment performance. Underperforming funds (or funds with products that underperformed for over two years consecutively) cannot accept new members until a fresh test shows visible improvement in their performance.
The digital plan to improve member retention
It also places a premium on funds to design their training and retention strategies with a more significant focus on helping members compare fund performances, investment portfolios, and risk profiles using the YourSuper tool.
Panelist and Chief Strategy Officer of Mine Super, Tristan Reis-Freeman, highlighted how these changes had positioned members as the most influential decision-makers for managing supers.
“Funds need to examine the changing dynamic and capture the end-to-end journey of an employee. Members often struggle to consume complex information about their super accounts. We must provide easy-to-understand information and digitize it to reach the maximum number of members.” - Tristan Reis-Freeman
Topping it off was Michael’s comment on how funds must scale up to attract new members and retain the existing ones. “They need to choose a fully digital approach to leverage member sentiments in a cost-efficient manner. SuperStream has been a successful example of how digital can help increase efficiency in backend operations, especially superannuation data and payments,” he added.
Tristan also seconded the approach for funds to invest in boosting their self-admin capabilities and digital DNA to improve the member’s financial outcomes.
The transitioning journey of smaller funds
Michael also explained that these budgetary reforms have exposed the vulnerability of funds, especially smaller ones. “The reforms have unveiled how smaller funds expect to strengthen their scale of service by placing mergers and acquisitions at the top of their agenda. And to keep their identity in the superannuation industry, funds must work upon building the net income outcomes of members.”
In the same light, the panelist Mukund Tumkur identified the top challenges funds face with mergers and acquisitions:
- Lack of human-centric design
- Legacy-based, outdated technical infrastructure
- Ineffective change management policies
“Funds must choose a model that is ‘digital to the core,’ one that augments member engagement via cost-effective digital advice, 360-degree customer support, omni-channel service delivery and more.” - Mukund Tumkur
He explained that organizations partnering with funds, irrespective of their size, during mergers and acquisitions must create a comprehensive digital journey for both members and funds that run in parallel. This apart from improving end user experience.
While a lot of action is awaited beginning July 1, 2021, we are confident that funds need to step up their game to engage members.
We understand that building advanced analytical capabilities can help funds get intelligent data-driven insights, ultimately personalizing the member experience digitally.
These changes have asked funds and trustees to strategically connect with members and employers, boost their organizational capabilities, and drive efficiency through their administrative and investment operations.
If you are talking, we are listening, partner!
For more details on how Wipro can help you thrive in these times of fundamental change, connect with us.