Superannuation funds seem today to be in the vice-like grip of two major impulses: one, to maximise investment returns; and two, to drive down costs.
Maximising after-fee returns to members has become a mantra recited ad nauseum; the consolidation of funds currently underway is part of a mania to maximise economies of scale, even though there’s mixed evidence that greater scale automatically leads to improved outcomes for members.
But the urge to consolidate, to drive up member numbers and to turbocharge assets undermanagement may simply be setting funds up for failure – or at least for disappointing members – later.
When you’ve amassed a body of members roughly the size of an Australian capital city, and you’ve squeezed costs to within a basis point of their lives serving members in accumulation phase, how do you then deliver a bespoke, personalised and individualised service to all or even some of those members as they transition to retirement?
A Super Fund Engagement Benchmarks roundtable, hosted in June by Investment Magazine and in partnership with insurer TAL, heard that solving the member experience issue is complex, and demands deep understanding of member cohorts, solutions delivered through multiple channels, and significant investment in people and systems. It also requires a shift in mindset for some funds to the delivery of more personalised member experiences.
All these factors mitigate against the low-cost approach of many funds – the likely solutions to improving the member experience, delivered well, will not be cheap.
Member experience research
The roundtable highlighted new member experience research in production by a joint venture between Conexus Financial (publisher of Investment Magazine) and CoreData Research, to create an industry-standard member experience benchmark. The outputs of the research will rank super funds against each other, based on their own members’ experiences, and will for the first time provide funds with insights into how they’re tracking, what’s going well and what needs to be improved.
Conexus founder and managing director Colin Tate said the development of the research stems from an event hosted by Conexus in December last year at which Minister for Financial Services Stephen Jones nominated improving the member experience and member services as the number-one priority in the superannuation sector for the Albanese government.
Tate said the early findings from the research suggest that “some of the very large funds aren’t really geared up for that individual experience”.
CoreData global chief executive officer Andrew Inwood said the superannuation sector is maturing and is entering a tertiary phase where the quality of services is coming more sharply into focus.
“We’ve been doing [this research] since 2017 and the most important issues that have been coming up are fees and performance, fees and performance, fees and performance,” Inwood said.
“This year, in some of the engagement data we did last month, services popped up – and we hadn’t seen that before. It popped up to the point that the [analyst] who did the work, we said to him that’s a big change, either the world has changed or there’s something wrong with the data.”
It turns out that the world has changed. “Service has become critical,” Inwood said.
“All of a sudden with Covid, aging population, more experiences, economic pressure, people are contacting [funds] more and having more contact. I know from the people I know… who run it, they’ve been telling me we just can’t handle it.”
TAL chief commercial officer Jenny Oliver said service providers have a part to play in helping funds improve the experiences of members, and a good example is when a member makes an insurance claim.
“The opportunity is well understood,” Oliver says.
“Right now, and certainly the conversations that we’ve had with funds over the last four or five years have changed demonstrably away from pure product and pricing conversations to service conversations – to conversations around how do we get the ecosystem working stronger together? How do we leverage data? And how do we leverage the APIs such that we can get the transfer of information and we can deliver the services far quicker, in a far better way?”
Accumulation is homogenous, retirement is not
If the accumulation experience for most people is largely homogenous (maximise returns, minimise fees, shoot for the moon – albeit within risk parameters), then the retirement experience is just as surely heterogenous and demands a different member-service approach.
Ceasing paid employment and moving into retirement creates uncertainty, fear and a need for reassurance. More and more members will turn to their super fund for help, but it simply can’t be provided by a low-cost, one-size-fits-all offer.
Jones already fired the starting pistol. He said there are around five million Australians currently in or nearing retirement. The wave of super fund members shifting from accumulation phase to decumulation is growing by the month. The minister also knows the experience of a significant number of members with their superannuation funds is already substandard. Exactly how funds will cope when demand for services really ramps up is a cause for concern, and Jones wants funds to address it now.
The compulsory nature of contributions means superannuation enjoys a particular social licence. If the industry fails Australians right when they need it most – not only as they retire, but also at other critical touchpoints such as making an insurance claim or seeking information on the best investment options, and even on what seem like relatively minor issues like changing personal details or investing member contributions when they’re received – then members, being disenfranchised, will disengage.
Without public trust and confidence the superannuation system itself, and the industry it has created, simply has no legitimacy. That is a potentially existential threat.
Digital-first, but not digital-only
The first place many funds turn to improve services and the member experience is a digital solution, with a promise of flexibility and lower cost. But it overlooks the fact that when personalised services are needed most (such as at retirement, or when making an insurance claim) funds are dealing with an older cohort of members, who may not be tech-savvy as their younger counterparts, or who are under great stress. And there are challenges also posed for some funds by low levels of not only financial literacy but also literacy, full-stop.
“Digital-first is important, because we know that newer generations prefer to interact that way and to do things on their own time and in their own method,” Kate Leplaw, head of member engagement at AustralianSuper, said.
“But based on our member audience, the push to almost digital-only is problematic, because we know that people are not financially literate…and need that [human] interaction.”
Leplaw said super funds have historically sought to treat all members equally, and that’s led to a lack of innovation in services.
“Therefore, we haven’t matured our thinking around [whether] there be differential services or experience models, depending on what people’s needs are,” she said.
“Coming from a banking environment that feels sort of obvious, but I think we just haven’t gotten to that stage of the journey yet.”
Spirit Super chief operating officer Kathleen Crawford said funds need to offer “channel of choice” to members, who will select the one that suits them best, at the time it suits them.
“The way to get people onto digital platforms is to reduce the friction,” Crawford said.
“If it’s easy, they will use it; if they hit roadblocks they can’t. That’s the way I’m thinking about it.”
Crawford said some member interactions just don’t work digitally. Member-service personnel are “dealing with the sick, the bereaved, the dying”.
“They’re not easy conversations to be having,” she said.
“I don’t think we can move that directly to a digital platform and expect [conversations] to happen. People want some compassion. They want some empathy on the way through.”
Crawford said Spirit Super has moved to a “completely individually case-managed system” to promote consistency in how a member’s issue is handled from contact to contact.
“I think one of the traumas is people having to retell their stories,” Crawford said.
Know the member
Developing member services and improving their experience relies on not only understanding members better, but on having the systems and technology in place to deliver the service. Funds that outsource administration don’t always have direct control of how the services are delivered.
Qantas Super has tackled the service-personalisation issue by developing a detailed understanding of what its members look like – and they are nothing like all the same, the fund’s chief experience officer Stuart Langveldt said.
“We don’t talk about the member as an amorphous mass, we get really specific around what persona we’re designing a product or service for,” Langveldt said.
He says the Qantas fund’s 30,000 members range from groundcrew, who in many instances don’t speak English, through to blue-collar workers and flight crews, executives and, of course, pilots.
“We realised very early on that we can’t have one service offering,” Langveldt said.
“We have quite specific, deep, granular personas across that membership base. Me and my team look at that every day before we design a piece of content, before we develop a service or an offering, we look at that to see who’s it servicing and why.”
Langveldt said many funds face the issue that while they recognise member experience is critical, they don’t directly control that experience.
“One of our biggest challenges from a member-experience point of view is that we don’t control the end-to-end experience,” he said.
“It’s one of the weirdest things I found coming into the super industry. I’m not from super; I came from retail banking and wealth management, and it was just so weird to me to think that the core services are provided by basically just two companies. Luckily that’s now starting to innovate.”
Hesta chief member engagement officer Josh Parisotto said delivering effective member service depends on “actually understanding the agenda, the member’s journey that they go through, and then digitising the low value parts and having strong triage points”.
“It’s interesting, the touch points are where members want to engage you or what they expect,” Parisotto said.
“Whether it’s retirement income streams, generic information, we’re starting to find now that they’re moving away from static content. They’ll watch a 15-second video, they’re not going to read a two-page email. They refuse to – they’re going, why would I do that?
Parisotto said the fund has the philosophy of looking out to look within, which means looking at how other industries design member journeys.
“We always focus on execution. Members aren’t going to execute filling in a PDS or the paperwork, they want to talk to a human. You can’t yell at an algorithm, you can yell at a human.”
A new approach comes at a cost
But re-engineering systems and processes isn’t always straightforward, or cost-effective, especially where funds are built on legacy technology.
Brighter Super COO Sean Marteene said it can be “incredibly, incredibly costly to re-platform”.
“Then when you’ve got fee-competitive [behaviour], or at least a lot of funds [have the mindset] that you are competing a lot on the fees, the MERs [management expense ratio] and all that sort of stuff that we’ve talked about, it can become quite a barrier to make really big re-platforming decisions,” Marteene said.
Old processes need to be examined as closely as old systems, Marteene said.
“We’ve been going through a few SFTs [successor fund transfers] and comparing to how others looked at how to take away some of the friction points, particularly members coming into a new fund,” he said.
“Some things can be perceived as you have to do them, or there’s some regulation or legislation in the background that means you have to do it this way. But some things have been done that way simply because some person five years ago made a risk-based decision that we’re going to do it this way.”
Marteene said these friction points are based on “our level” of risk tolerance.
“Part of our process is going to be accepting that to take away the friction, we might have to be more comfortable with a little bit more risk,” Marteene said.
Rest Super chief member officer Deb Potts said the fund’s demographics mean its members tend not to accumulate very high balances – for women who are with the fund at age 67 it averages about $123,000.
Potts said it can be tricky to deliver to these members services that they might gain from.
“One of the flipsides of having a small number of these people and an in-house salaried advice channel is we do proactively outbound call when they hit that age, because we can – we know who they are,” Potts said.
“They are very cynical and sceptical about anyone calling them and saying we can save you money on your tax or we can help you transition to retire because of literacy [and] confidence.”
Taking a member-centric view
Potts said it is refreshing that funds increasingly are viewing the services they deliver from the member’s perspective, not from the perspective of the rules and regulations that govern what funds do.
“Not only the risk level, but regulatory requirements for DDO [design and distribution obligations] and the retirement income covenant, and all of those things, drove how we approach the transition to retirement in the past,” she says.
“Flipping that on its head, DDO and retirement income covenant disclosures should be an output off the back end of an ultimately great outcome for someone in retirement. But we don’t always, or haven’t always, thought of it like that.”
CareSuper chief experience officer Jean Luc Ambrosi said there are already signs the industry is taking the member experience issue seriously – even if the solutions to poor experiences have yet to be fully mapped out and implemented.
But Ambrosi added it is clearly preferable for funds to develop their own member experience solutions than to have them regulated.
“You can see that there’s an incredible amount of effort being done around experience, just by the numbers of chief experience officers around this table,” he said. “That’s already a sign that the industry is taking it extremely seriously.”
Ambrosi said this will involve “a lot of test-and-learn” and it will be the same with the retirement journeys.
“Talking to ministers and all these people, one thing that’s been a little bit difficult to manage for super funds is regulatory changes,” Ambrosi said.
“If engagement is regulated, I’m not sure it’s going to help, because I think you’re going to see the mega-funds and the medium funds are going to start building their own engagement practices and strategies and they will be differentiated one [from] another.
“If we bind everything and it all becomes, you know, the same, it might not work at the end of the day for the entire population.”
TAL chief information and innovation officer Fiona MacGregor said creating effective solutions would require close co-operation from a range of stakeholders in the industry – from funds themselves to service providers such as insurers and administrators.
“You would expect me to say this as a chief information officer, but having an engineering voice alongside people who understand customer member product operations, having that blend of voices with clarity of direction, feels feels important within our businesses and across the ecosystem,” MacGregor said.