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
Anderson.
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.
