It’s been more than a decade since the then First State Super (now Aware) was embroiled in a data breach problem but, which ever way you look at it, data management is increasingly a front and centre issue influencing the industry’s strategic decisions going forward.
Some in the industry dismiss it as yesterday’s story in part thanks to outsourced administration to Link et al, but Deloitte’s Andrew Boal, among others, sees data as an underlying, big sleeper issue.
Cyber security particularly, following First State’s problem, is obviously always at centre stage.
The Privacy Commissioner in 2012 found First State breached the National Privacy Principles for not taking reasonable steps to protect members’ data on its web site.
Alarm bells ringing
No fines were issued in part because of the speed of the fund’s responses but the warning bells for the rest of the industry rang loud and clear.
AustralianSuper, for example, now stores member data in the cloud and to put the issue beyond doubt issues a warning on member emails saying: “AustralianSuper will never ask for your personal details or link you to a login page”.
The digital age has underlined the benefits to all companies from better use of the data they collect in the normal course of business.
But there are plenty of issues confronting the super industry this year including APRA’s My Super benchmark tests which, for the follow-up failures, means effectively handing over the keys to the shop.
Then there is the extension of benchmarks to choice products, scale and best interest member outcomes, retirement income policies and the forthcoming financial advice review.
The My Super APRA benchmarks obviously loom large for the affected funds but strategically, the decisions which will decide just who clears the benchmarks have already been made.
Key strategic value
For those who survive, data collection and management are of key strategic value.
The digital giants like Google, Amazon, Meta and Apple base their business futures around their ability to collect and best use customer data. The same game applies in superannuation.
The retirement income covenant which passed into law recently further underlined the need for funds to have better member data.
Others point to the best financial intertest rules as equally requiring better data use so the fund knows what members need.
SuperRatings’ Kirby Rappell acknowledged the concern but noted: “the funds in general are much better with their data management [than they were]”.
One way or another, sustainable fund administration performance will depend on the quality of data the fund has and how it is used. The starting point, however, is the more data you have the more effort must go into protecting it.
Investment performance is clearly paramount and shortly funds will have to disclose more detail on just what assets they own. But it’s administration where data is key, starting with whether the funds should follow AustralianSuper’s lead and store their members’ data in the cloud.
Insurance data is a whole new field of concern and potential competitive advantage.
Three years ago, APRA raised the bar saying it would “upgrade, the breadth, depth and quality” of data it collects and when the regulator talks about improving its data, that means you have to lift your own standards.
JANA’s John Coombe said that at a more basic level, for some funds just knowing who is an active member is a challenge because of the huge turnover in members and their locations.
UniSuper’s Luke Barrett argues the engagement issue is overcome in time as members get closer to retirement or the fund balances hit a threshold where they become interesting.
The reality is for the bulk of members superannuation is a “set and forget mechanism” until engagement lifts.
Obviously funds want more engaged members for the simple reason that it is easier to design products for people who give a damn.
APRA’s mandate is clear saying: “It is crucial that Registerable Superannuation Entity (RSE) licensees, regulators, members and other interested stakeholders have access to high quality, consistent data to assess industry performance and the outcomes being delivered for superannuation members”.
The flip side, it warned, is superannuation is a “fraudster’s dream, including full names, addresses, email addresses, membership number, age, insurance information, superannuation amount, fund allocations, beneficiaries and employer information”.
When funds design retirement income products the more information they have the better, including spouses income, other assets, tax files and bank accounts.
On another level, treasurer Josh Frydenberg and superannuation minister Jane Hume have made clear superannuation is next in line for Consumer Data Right (CDR).
CDR enshrines consumers’ access to their data which can be shared with third parties to access better deals. This means better comparisons can be made on different products and services to help consumers manage their own finances better.
This year it is being rolled out from banking to telephone companies and energy companies but in a statement last year they noted “open finance” will follow “open banking”.
Compare and save
The ministers said in a statement: “open finance will allow consumers to compare and save across a greater range of financial products covering not only banking, but also general insurance, superannuation, merchant acquiring and non-bank lending service providers”.
They added: “this paves the way for the creation of new and innovative services such as personal finance and life administration apps to take the time, cost and complexity out of everyday tasks and big financial decisions for consumers. Combining open finance datasets with banking transaction data can also provide a consumer with a more holistic picture of their financial circumstances that is all held in the one place.”
The aim is to give people an incentive to switch providers which in theory will encourage competition through better products and services.
Investment performance may be the ultimate benchmark but this depends in part on costs.
The advice conundrum
In the next few weeks the Federal Government is due to release the final terms of the inquiry into financial advice including the name of the person who will lead the review.
The aim is to establish the best way for affordable, accessible quality advice and, once again, data holds the key.
The CDR allows consumers to gather all their financial information easily into one note to hand to an adviser which significantly cuts costs and increases transparency.
A flurry of new rules for the industry carries with it an underlying competitive message: better data management helps sustainable member performance.