The superannuation industry has spent more time generating investment products than connecting with members, and the resulting lack of proximity to members and clients is a risk to both the industry and the end beneficiary.
The balance between member engagement and investment objectives needs a rethink, according to Sean Henaghan, CIO, multi-asset group, AMP Capital Investors. Henaghan and Christian Super CIO Tim Macready discussed their views on how to engage members at the Fiduciary Investors Symposium in Victoria in November.
“We, as an industry, have accepted the fact that we sell a product members pay 9.5 per cent of their salary into, [for which they receive] no interest, and we’ve got away with that,” Henaghan said. “You think about what’s happening in the world today about proximity to customer, and if you’re looking from the outside of our industry, we are going to get disrupted, because we have no customer proximity.”
Henaghan pointed to peer benchmarking and maximising returns as problems within the industry.
“We have this obsession about maximising return,” he said. “The objective of superannuation is to give people a comfortable income in retirement, but nobody talks about income. It’s all about capital value of your savings, and that creates a whole cycle of chasing returns and you know there’s a lot of noise about what’s happening, with classification of direct property, direct infrastructure, but it’s all about getting the best return, and that’s about business risk. That’s not about the member.”
Christian Super is a small fund – 27,000 members and $1.5 billion in assets under management – with an investment mission strongly aligned to values and the Christian faith. Macready said the fund has highly engaged members, and that it strives to keep the investment team engaged with the members.
“We still send people from the investment team into the call centre on peak loads and at Christmas to get some of that closeness to the member and understand what they’re wanting,” he said. “Our job is to fight for the product that best meets the members’ interests, ahead of whether that meets the interests of our investment committee or of our marketing manager.”
Macready also noted that, relative to peers, Christian Super has “third-quartile performance and second-quartile risk”. That doesn’t hurt the fund in terms of retail growth, as it has 12 per cent new members a year, and 8 per cent departed, but it hurts when trying to present the fund for default employer tenders he said.
The fact that people are choosing to move their balances to self-managed superannuation funds is a symptom of customer dissatisfaction, Henaghan said. He noted that AMP Capital Investors has designed a lifecycle product to provide a “glide path” into retirement income, and that increases in technology will make it easier and more affordable to get to an individually managed account state.
