When facing a difficult choice between keeping fees as low as possible or investing some revenue in better systems to help members engage, data shows members are willing to pay for a better experience, according to Andrew Inwood, global head and founder of research consultancy CoreData.
Speaking about member engagement with Julia Newbould, managing editor at Conexus Financial on the ‘Future of Super’ podcast, Inwood said member experience becomes particularly important once members retire.
“The data we have on that is pretty compelling,” Inwood said. “People, as they get older, really want better service and they’re prepared to pay for it.”
This means that as growing numbers of members approach retirement, “superannuation funds are going to have to twist and morph from businesses which are designed to accumulate funds as cheaply as possible and manage them as well as possible, to ones which are also incredibly good at helping people through that transition,” Inwood said.
Inwood said a surprising finding from his research was how much members still value phone-based and face-to-face communication. Members want digital solutions to help them “to a certain point,” but when they are facing more difficult decisions, they want to speak to someone, he said.
“I’ve been working in this industry for 30 years and running CoreData for 20 years and been mapping that linearly for that time, and I thought that the phone would have started to die away by now and it hasn’t,” Inwood said. “People still really want to get – in times of uncertainty – someone to talk to and someone else to take responsibility and navigate them through the processes.”
CoreData research shows smaller and mid-sized funds tend to do a better job of communicating with their members, while larger funds have “really struggled to cope with members at scale,” Inwood said.
Data for the fund Equipsuper, for example, shows when members were asked if the fund was interested about them, and if the fund cared about them, the answer was “yes” for 68 per cent and 62 per cent of respondents respectively.
“For smaller funds, that number is [typically] about the same, for the large funds that collapses to 18 and 20 per cent [respectively],” Inwood said.
While inertia has helped funds in the past, Inwood’s data also shows falling confidence in larger funds on the measure of whether members see a future with the fund and their confidence in the fund’s risk management, while there has been an increase in confidence for smaller funds. This could potentially see some members switch to other funds, he said.
Also speaking on the podcast was Emily Barnes, head of insights and design at Equipsuper. Barnes’ role involves leading a team that encompasses data analytics, research, regulatory reporting and human-centred design, with the goal of better understanding the fund’s members.
Equip has an older demographic than a lot of competitors, with an average member age of 48 and around a third of current members set to retire in the next ten years. Barnes said the fund’s research with CoreData had shown potential for better engagement with members on fundamental issues related to retirement.
For example, members aged 50 and older don’t always have an understanding of the tax benefits available in the pension phase, Barnes said. Some don’t understand the product options available to them, or that the day they retire is not the day their balance is at its maximum.
“They think it’s kind of like a bank account, you start drawing down from day one of retirement and you just chip away at the balance,” Barnes said. “They don’t quite grasp that they can continue to keep that money invested and it can grow over time and your annual drawdown – if you tweak it right – doesn’t really eat away at your total retirement savings.”
Having merged with Catholic Super, Barnes said the fund had found communicating with members and building awareness requires different approaches for different cohorts.
“Having this human-centred design experience model helps us figure out how we talk to a 65-year-old Catholic Super employee, who’s been an administrator in a Catholic primary school for their whole career and is approaching this huge milestone with a sense of comfort and control; versus an engineer on the Equip side who might be incredibly financially literate and is wanting us to validate his own thinking and planning around a retirement pension strategy,” Barnes said.
Funds need to be available when members need them for something, and make it easy for members to deal with them in these instances, Barnes said. But they also need to communicate information members need to know at key “trigger events” such as job changes, retirement milestones or periods of ill health.
Anticipating these events can be difficult, making data analytics an important investment for funds, she said.
There is a point that comes roughly between ages 45 and 50 where superannuation becomes “a much less distant and abstract proposition” and members begin paying more attention to their statements, as well as checking investment strategy and thinking about the day when they can begin to access their money.
But it is a balancing act for funds between encouraging member engagement on important matters – such as understanding their options or how to structure their post-work income and the role the fund can play in this – without encouraging engagement that may be detrimental to the member’s outcome.
“So, things like switching behaviour, or trying to time the market with investment performance is something that, you know, you might look at on paper to be a signal of engagement, but it’s actually not promoting the best interests of the member if we’re encouraging members to use the product in a way that it’s not designed for,” Barnes said.