Changes to the superannuation industry’s technology systems, those that have occurred already and those that must soon take place, have been brought into stark focus over the past 12 months as choice of fund looms.
Consequently, the market has been split into two camps in terms of how the effects of member choice are anticipated — those that are ready and those that are trying to catch up, according to the chief executive officer of Bravura Solutions Iain Dunstan.
According to Dunstan, no matter how you look at it, a fund will find itself well positioned if it has started its technological moves early.
“But I still see a lot of sprinters in the marketplace, rushing to make sure they are ready,” he said.
John Burke, business development consultant for Financial Synergy, also sees preparation as the key to retaining a competitive edge as the industry navigates the changing environment it finds itself in.
“While I believe the door has definitely not closed for those yet to streamline their processes using available technology, specifically straight through processing (STP), the reality is that those who have embraced the use of STP will have a sharper, more competitive advantage when attempting to win new business,” he said. “Those still waiting for their legacy system providers to rise to the challenge will be left behind.”
And so the question presents itself. Is it too late to start implementing technology upgrades with July 1 just around the corner? The answer? It depends what you’re looking for.
The managing director of DST International, Ian Mathieson, said that it is simply too late to start coming up with a complete solution in time for choice of fund’s introduction.
“The best that those in that position can hope for is to duplicate their current information systems and to operate the duplicate for choice. It’s a less elegant way of doing things and it will never be anything but temporary but it is a workaround that may suffice,” he said.
On the other hand, Burke states that Financial Synergy has seen the benefits to be gained even now by clients moving away from their legacy systems. His belief is that though it may be too late to capitalise on the initial flurry of movement that July 1 will no doubt bring, an upgrade now is by no means pointless.
“The time is still ripe for organisations to move to a leading edge system, particularly as STP technologies and choice mature and stabilise,” he said.
Coupled with the importance of adequate preparation for member choice introduction is recognition of the vital role that flexibility will play in the faster-paced environment that superannuation is entering.
Andrew Hamilton, business development manager for Queensland-based firm Supercorp, feels that the early adoption of STP with a view to being ready for choice of fund should have encompassed flexibility as well.
“There was little doubt that changes to the choice legislation would occur. This should have been taken into account and the flexibility to accommodate such changes built into the software solution,” he said.
DST’s Mathieson agrees, stating that flexibility is already inherent in current technology.
“Any solution that has embraced the net, regardless of the programming language it may have been written in, has flexibility inbuilt,” he said “The only area that can let you down is design. Poor design regularly means that an application is not as flexible as the technology it is built upon allows.”
When talking of flexibility, Dunstan provides a third perspective. He looks at the resources that a technology provider has at their disposal rather than at the software solution that they have in place.
“We at Bravura believe we are in the best possible position to move with any changes that may occur post-July 1 because of the resources, in both experience and capital that we have behind us,” he said.
But fund choice notwithstanding, the advantages of straight through processing are not limited to preparation for changing legislation. STP, according to Hamilton, simply means reduced costs for processing.
“That is quite possibly the main advantage,” he said. “But more than that, the reduced costs can be passed down to the consumer, allowing the fund to become more attractive to prospective members when member choice enters the picture.”
The chief executive officer of Garradin, Stephen Bowhill, sees things similarly. He said that though Garradin’s clients are platforms and fund managers, their views on STP align with those providers whose clients are individual funds.
“When it comes to STP, the focus is solidly on the efficiency and cost-saving benefits to be obtained in terms of automated distributions,” he said.
Not all effects of STP use relate only to the software used by superannuation funds and fund administrators. The software used by employers themselves can also change. In response to member choice, many accounting applications have been altered so that a default fund is nominated. The benefits of being that default fund should be obvious. But will it be as great as anticipated?
DST’s Mathieson said that the position of default fund will probably prove to be important, at least initially.
“The reality is that having a default fund makes things simple. We are, after all, creatures of habit,” he said.
It is Mathieson’s belief that a small percentage of Australia’s population will study funds over the coming months and find which of those funds is best for them, but for the most part people will want the simplest options.
“The position as default fund may become even more crucial over time,” he said. “There is little doubt that there will be a rush of movement come July 1, but in 12 to 24 months time, it is likely that such movement will dissipate and the default will come into play once more.”
Financial Synergy’s Burke is less concerned about the position’s importance.
“I think that in the short-term, being a default fund will be a big advantage but that as the ‘retailisation’ of super becomes mature, the default fund will play a smaller role. After all, how many employers have a default bank for the payment of salaries?” he said.
When July 1 comes around this year, the superannuation environment within Australia will change. As to how it will change, the jury is still out, according to Bravura’s Dunstan.
He said that Bravura had witnessed the two differing perspectives in terms of a fund’s behaviour in the lead-up to choice of fund.
“Those that feel there will be a great deal of movement have been gearing up for choice for a long time. Those that see little change in where the money resides are the sprinters, those only making their upgrades and preparations now.”
Burke sees choice turning the customer’s focus on to the products available in the marketplace.
“The primary impact we are seeing is through the provision of STP within the business and providing a broad range of real time services to customers via the internet.”
But according to Dunstan, regardless of what money and how much will move where, the changes in the industry will ultimately be good for the end user, the employee.
He states matters quite clearly: “It doesn’t matter which funds will be most profitable. The fact is that competition will be increased. The effect of increased competition in any market is that the consumer wins, and superannuation will be no different.”
