Minister for financial services Stephen Jones has put the superannuation industry squarely on notice that the government is not happy with the quality of member service currently provided and is demanding funds do better.
Jones cited anecdotes of funds simply not answering members’ phone calls and of funds answering calls but not solving the member’s problem. He’s targeting member service and the member experience for a very good reason.
The social licence superannuation enjoys cannot be taken for granted. The industry can’t expect to retain its privileged position, namely, being the beneficiary of mandated multi-billion-dollar inflows and enjoying favourable tax treatment of investment earnings, if it does not enjoy the confidence and trust of the public at large. A great way to destroy that trust is to mess members around just when they need help. Once trust goes, the entire system is in trouble.
Jones’ admonishment of the industry coincided, more or less, with the entry of Vanguard to the superannuation space. A lot has been written about this move, but Jones’ comments, including at the Conexus Financial Political Series lunch in early December, add a certain piquancy to the issue. Jones wants competition between superannuation funds. The current situation has led to an industry he characterises as being “50 shades of beige”.
In Vanguard, and in fact in other retail providers as well, there are low-cost superannuation providers. But Vanguard is different from its retail competitors in being a mutual, broadly equivalent in philosophy to the profit-to-member ethos of industry funds. Where individuals are not compelled to join industry funds by virtue of their employment situation, these funds now face another kind of profit-for-member competitor that’s barging into the space from outside the club.
Vanguard cut its teeth servicing individual investors and financial advisers. Retail financial services providers operate in a truly competitive market and compete in the way Jones means to when he says competition between funds cannot exist solely in the funds’ marketing departments.
Consumers need genuine choice, spurred by genuine Jones-style competition. Genuine competition drives – among other things – improvements in member services and a better member experience, better retirement solutions.
Right now, viewed as a group, industry funds probably lag their retail counterparts on their ability to engage with members, to provide a satisfying member experience, and crucially, on the issue of cyber security as well – another issue that will receive more attention in 2023.
An informal and deeply unscientific poll of super fund members conducted by Investment Magazine recently found that out of eight super* funds represented, only two had introduced two-factor authentication as a default setting, and both of these were retail funds (the only retail funds in this sample).
Only two funds offered 2FA as an option – but even then, members had to hunt around in their profile settings to work out how to turn it on. The other funds didn’t have 2FA available at all.
This writer’s own industry fund account does not have two-factor authentication which is unacceptable in this day and age. Considering that in the past eight months there have been two relatively sophisticated attempts by fraudsters to obtain the writer’s login details, it’s clearly only a matter of time before the trustees of one fund or another find themselves in court trying to explain how, in full knowledge of what’s already happened to businesses such as Optus and Medibank, they still did nothing to help prevent members’ savings being stolen.
*This article was edited on 6 January 2023 after ‘industry funds’ was incorrectly used when the article was meant refer to broader superannuation funds.