In an environment where fund visibility will be more important than ever, superannuation schemes will need to think deeply about how they promote themselves and their brands to potential new and existing members.
Due to the impact of government measures contained in the Your Future, Your Super proposals – particularly relating to single default account or ‘fund stapling’ – marketing and promotion will become more important to the survival of some funds, submissions to the government on the proposed reforms highlight.
Actuarial consultant Rice Warner notes the increasingly important role marketing and brand building will play in light of the new stapling rules, highlighting that funds disadvantaged by the proposals will need to be visible in the community and to employees to have a chance of staving off member declines in its latest submission.
Rice Warner’s submission suggests a loosening of the rules around anti-hawking and fund promotion to create a more level playing field for all funds under stapling rules and it highlights employer schemes as likely to be “starved of new members” under the proposals.
Meanwhile the Conexus Institute’s David Bell notes he has “strong concerns” the industry will significantly increase marketing spend in what could resemble a “marketing free for all”, particularly as non-first employer funds experience reduced flows when account stapling comes into effect.
Marketing vs branding
Funds across the board will need to pay careful attention to how they execute their marketing efforts as they look to make themselves more visible to members.
The government’s proposed best financial interest obligation Treasury law amendment, which bans funds from spending member money on brand building while permitting marketing spending in cases where it can be proven members benefit if costs can be reduced through scale.
The best financial interests explanatory materials describes banned brand building as expenditure relating to building a brand, promoting awareness of the fund or supporting external activities, which are not supported by an identifiable and quantifiable financial benefit to members. It describes permissible marketing activities as where there is a benefit to member financial interests because it results in more members and increased scale.
A ban on brand building could come at a difficult time for some funds seeking to build awareness of new brands following recent or would-be mergers.
On Monday the newly merged MTAA Super and Tasplan announced it would rebrand as Spirit Super when its merger closes on April 1 this year. This and other future fund combinations might not be as fortunate with propsoed spending on the roll out of their new brands as First State Super and VicSuper was, which rebranded as Aware Super mid-last year.
“Will the inability to effectively re-brand become another deterrent to industry consolidation?,” Bell poses.
Level playing field
Proposed conditions on marketing and bans on branding could create an unequal playing field, as funds look to raise the stakes on their viability campaigns, The Conexus Institute’s Bell points out further.
While profit-for-member funds will be directly impacted by the best financial interest proposals, commercial funds are still able to pay dividends to shareholders and could fund branding via the balance sheets of their parent entities, Bell says.
“In the hierarchy of what negatively impacts consumer outcomes I’m not convinced branding ranks as worse than dividends to shareholders. If the policy intention is to reduce spending on brand then I expect the reform as proposed will have large leakages. An effective solution would be to ban branding activities regardless of where it is funded from. Of course, this is difficult to enforce for funds which are part of vertically or horizontally integrated businesses” Bell says.