Disengagement in superannuation funds is caused by members’ fear of loss, confusion over decision making, and embarrassment at small savings levels, a behavioural economist told delegates.
The findings came from interviews with 1500 super fund members carried out by market research firm, the Leading Edge.
It found 67 per cent had no interaction with their funds in the last year and that negative feelings about decision-making on their retirement savings was commonplace.
Andrew Therkelsen, managing partner of the Leading Edge agency, listed a number of strategies funds could use to make more members engaged.
Overcoming fear of loss was the most important first step to take.
“There is a huge degree of fear that has been driven by the GFC and most members now believe if they move one way they will get it wrong, and if they move another way they will get it wrong too”, he said, adding that some also felt suspicious of being tricked.
Secondly, he said saving and interacting with funds needed to be made easier. He contrasted the way in which other financial services had been demystified by price comparison sites and he cited the example of the Westpac app that allowed individuals to add to their savings, however small the amount, at the push of a button on their phones.
Therkelsen said the disengaged members did not believe that these developments were happening in super.
He gave an example of the typical thought processes of a disengaged member as follows. “It scares me, it is intimidating. There is too many things to consider. Let’s keep everything as it is that is the easy to do. I do not have the head space to deal with this, there is too much else going on in my life. I only have a certain amount of mental energy to invest in this.”
He added that funds should tap members desire to act in the same way as others.
“We are essentially herd creatures. We like to do what other people are doing. So tell people what others are doing. People like me in my age group or demographic are doing these strategies. These will drive engagement.”
|Day 1 newsletter from CMSF 2013|