It’s no surprise that super fund members are worried. SuperRatings estimates the median balanced option generated a return of -0.4 per cent for February and expects further ups and downs in returns in coming months.
This follows a fall of -4.8 per cent return in 2022, the first negative calendar year since 2011.
According to UMR Strategic Research, the market swings last year caused a third of industry fund members to consider changing their super options. Worryingly, one in five said they had switched to more conservative options during market dips since the start of COVID-19. And, those aged between 18 and 34 were the most likely to change investment options.
Given the risk of members of members having knee-jerk reactions and crystalising losses, communications and advice are front of mind for super funds.
“Clearly communicating investment performance is essential at any time and market volatility only amplifies its importance,” Colonial First State’s chief customer officer Joshua Grace tells Investment Magazine.
Similarly, REST’s chief member officer Deborah Potts says market fluctuations can be unnerving for members which highlights the importance of communication during periods of volatility.
“Rest is the largest super fund for young Australians, with more than 1.2 million members under the age of 35, and we know many don’t understand their super. We also know people of all ages can find the prospect of a negative investment return worrying during periods of market volatility.”
Higher demand for advice
REST picked up a strong correlation between market movements and a rise in member requests for advice about investment choice according to Potts.
“During these periods, inquiries to our advice team can increase by up to three times the normal volume,” she says.
“The call volumes at our contact centres can also rise – for example, they were above forecast levels in May and June 2022. Accordingly, our advice and member teams provided increased levels of support over this period.”
Similarly, Aware Super also fielded more call from members seeking help. “While there hasn’t been a significant spike in activity at our call centre, we are receiving more calls from members who are looking for help and advice and are interested in discussing investment options,” says deputy CIO Damien Webb.
The fund also experienced a small increase in switching activity but far less than during the onset of the pandemic.
“We’re really encouraged by the limited switching activity as it indicates members increasingly appreciate the importance of staying the course with their investment strategy if their circumstances haven’t changed. We also observe the value of advice in assisting members to navigate conditions,” he says.
Worrying older members too
Members close to retirement may be benefitting from rising interest rates if they rely more on cash returns, but they still worry about their super.
“Members nearing retirement are highly engaged with their super and understandably more likely to be concerned about the potential impact of market volatility,” says Webb.
“When they contact us in times like these, it’s frequently to seek insight on whether they’re in the best investment option.”
Webb says in its communications, Aware Super urges older members with questions or concerns to make contact.
“We can provide general advice relating to their super account at no extra cost and for members with more complex needs, comprehensive advice taking into account their full financial situation is available for a fee,” he says.
“Our webinars and seminars are particularly popular with members in this age group and current market conditions are often a key topic of focus. We have an upcoming webinar [March 28], for example, on investing in times of uncertainty.”
Despite their benefit being based on a formula and not investment returns, even defined benefit fund members worry about their returns, according to Nada Siratkov, chief experience officer at State Super, a public sector fund.
Being generally older, Siratkov says many State Super members like to call the fund and it does see a spike in calls when markets are volatile.
“We have prepared our contact centre with scripting to respond to and alleviate their concerns,” she says.
The fund also assesses what’s top of mind for members calling in and amends its communications to address some of those issues, she adds.
Increasing member comms
Webb says Aware Super has stepped up its communication activity to help its 1.1 million members better understand the prevailing economic trends and make informed decisions.
“The effects of market volatility and economic uncertainty have been a key focus in our quarterly investment update, which we share with members on our website.
“We’ve also produced a series of extra communications on these issues, including helpful ‘explainer’ videos published on our website and YouTube.
“We actively contribute to media articles on these topics. We discuss them in our live member webinars, seminars and annual members’ meeting and in newsletters and on social media, and we’re also in the process of rolling out a series of on-demand webinars to help our members understand these and other important issues around super.”
REST has also upped its communications activities. Potts says extra activities include dedicated news articles and content for its online learning centre and using its Rest App, social media and e-newsletters to promote these.
“In calendar year 2022, online educational content on topics like inflation, interest rate rises, investment diversification and market volatility received more than 120,000 unique page views,” she says.
The questions members typically ask REST are:
- Am I going to lose all my money?
- Am I in the right investment option?
- Should I switch to cash until things improve?
“In these circumstances, it can often be helpful to educate members around the core objective of super and the value of focusing on long-term returns rather than short-term performance,” says Potts.
“Often communications encourage members to use our digital advice tools or contact our advice team.”