Funds that don’t clearly have a viable future shouldn’t be using members’ money to advertise, with the regulator notching up its focus on the business case behind marketing spends, experts said.
Before launching a multi-million-dollar marketing campaign, the first thing for trustees to consider is whether their fund has a viable future in terms of being able to offer competitive fees and performance in a sustainable way to members, said Linda Elkins, national sector leader, asset & wealth management at KPMG Australia.
“If the answer to that is ‘no’, the regulator has expressed a view that funds should consider whether they would be better off merging with another fund rather than perhaps thinking that they could engage in a marketing campaign to turn that around,” Elkins said.
In a discussion hosted by Investment Magazine, in partnership with AIA Australia, as part of its Future of Super podcast series, Elkins said funds needed to carefully weigh up the costs and benefits of using members’ money to advertise.
If the trustee decided to go ahead, the Australian Prudential Regulation Authority would be focused on proper documentation of the business case behind that decision and its enactment. If the marketing plan wasn’t working, APRA would expect the fund to pivot to another strategy, Elkins said.
Marketing can be a laborious and somewhat thankless exercise for superannuation funds, particularly when seeking to attract younger members far from retirement. Most Australians would probably struggle to name more than a few superannuation funds, admitted Tim Barber, head of Mercer Super.
“If you’re starting from a position of not being a household brand or being a very low recall brand, which the majority of superannuation funds I’d argue are, it’s a pretty high spend to get yourself to that point where consumers are recognising your brand, aided or unaided, and therefore, you’re getting the benefits of that brand awareness in a market,” Barber said.
But the trend towards consumer choice along with the impending introduction of stapling legislation means attracting those young, disinterested members is more important than ever, particularly with a significant number of funds in net cash outflow and a growing focus from the regulators on scale.
Barber said the Consumer Data Right coming through various industries and the rise of digital interfaces are leading to greater competition and innovation by promoting consumer switching activity.
While receiving the benefits of superannuation may seem a distant reality, the prospect of retirement funds contributing positively to the world in the meantime may be felt more closely. Alignment with a social or environmental goal is a strong driver of consumer choice, Barber said.
Alignment with a purpose
“I think consumers are also choosing brands more generally where they see alignment with a purpose, and I think for the superannuation sector, areas like sustainable investing, for example, are becoming increasingly more important,” Barber said.
Branding will be particularly important for funds seeking to avoid over-reliance on the fund ranking tool soon to be introduced through the Australian Taxation Office portal, Elkins said.
A fund’s ranking on fees and importance will be extremely visible and well-covered by the media, and branding and promotion will be the only way to inform consumers about social values, environmental commitments, or other offerings such as insurance or digital capabilities.
“Funds that want to be able to tell all of their story will need their brand and their values to come through,” Elkins said.
It will also be critical to retain members approaching retirement, she said. These members may be more likely to switch, as the topic of superannuation will start to become more important and engaging.
And in a world of greater consumer choice, funds previously reliant on receiving members through defaulting will need to completely re-think their member experience with the process of onboarding to make sure it is smooth, she said.