Industry funds should consider charging more for administration and doing so on a percentage-of-assets basis, to help retain nervous members and to survive any future automatic account consolidation regime, according to Mercer executives Russell Mason and David Anderson. Mason is Mercer’s national business leader for multi-employer superannuation, and Anderson the business leader for outsourcing. There are approximately three superannuation accounts for every Australian worker, so funds which rely on a fixed fee per account face a “one-third to two-thirds” reduction in their operating revenue if an automatic account consolidation regime is introduced, according to
The industry fund model of flat-fee, inexpensive administration was already coming under pressure as members struggled to remain confident,
Anderson said, as exemplified by Mercer’s latest Superannuation Sentiment Index Study of 1000 working Australians. The study found the proportion who rated super as only a ‘poor’ or ‘fair’ way to save for retirement doubled from 17 per cent to 34 per cent in the last six moths of 2008.
The call centre was becoming more important in such an environment,
Anderson said, and industry funds had to compete with corporate and retail master trusts which might charge higher admin fees, but were “set up for high levels of customer intimacy”. Calls from worried members should be answered by a human and not a voice recognition system, and a sophisticated CRM system was needed to ensure members never had to repeat queries from previous calls.
Ideally dedicated financial planners should sit alongside the frontline operators,
Anderson said, to allow a “warm transfer” of concerned members seeking basic super-related advice, or a preliminary fact-find for those needing a broader review of their arrangements given the investment downturn. Mason said any fund with $2-3 billion under management should subsidise at least one dedicated financial planner in their call centre, arguing the costs would be more than offset by the benefit of member retention.
That layer of immediate advice might also persuade members not to make switches into cash where it was not appropriate, Mason said. In fact there was a case for APRA to relieve super funds of their obligation to immediately accommodate members switching to cash, Mason said. Mercer’s study found 68 per cent of investment switches in the second half of 2008 were to more conservative options. This would be a further regulatory concession to these extraordinary times, following on from the relief granted from minimum draw-down requirements for allocated pensioners. Mason said this had been sensible given the ATO calculates 74 per cent of allocated pensioners elect only the minimum draw-down, often to access a part-Age Pension.