Get a grip

Australia has one of the world’s most competitive retirement savings markets. In the ‘middle market’, servicing average Australians, there are three very different offers: industry funds, retail funds and self-managed super funds (SMSFs).

Industry funds are now the incumbents. Regulatory compulsion delivers the vast majority of those employed. In essence, it is a marketing and communication failure to lose members.

Financial planners and accountants promoting retail funds and SMSFs have to make an offer that seems better. They must attract, convert and then retain their target clients, the older members of industry funds with higher account balances.

Industry funds have tended towards a fund centric perspective of the world, generally focusing heavily on high investment returns, low costs and mutuality. Communications with members seem largely regulatory driven, with financial calculators unintegrated into a wider engagement and education process. There is less for members to value long-term than most trustees would prefer. Many attempts by super funds to add value to members through financial planning and education have failed because members could not find a reason to learn in the first place.

Before you can educate, you have to engage

Engagement is a significantly more member centric strategy. It needs superannuation calculators integrated with all member communication onto a comprehensive financial planning platform. In future, the focus will be on a consistent, relevant and continuous dialogue helping to engage members, ‘en masse’, in a meaningful and customised manner that encourages them to build their personal wealth and plan for the future.

The challenge is to personalise the member experience by using lifestyle or goals based planning and to help them better understand that their present and future lifestyle will be influenced more by their spending and saving rather than the returns they earn. The objective is to help members take responsibility for their financial future and to give them the ability to change their financial behaviour in pursuit of their own goals.

These next generation online ‘calculators’ will provide general advice and access to online guidance through ‘smart’ systems. After members enter, or funds download on their behalf, brief information about themselves they will instantly see where their current finances are headed, taking into account all the major personal tax, superannuation and Centrelink age pension calculations. Smart systems will provide a member with a real-time analysis of their circumstances and ‘recommend’ what to try next to improve their plan (i.e, retire later, save more or take more financial risk). These systems will turn what has been in the past a static, formulated and uninspiring encounter into a dynamic, meaningful and rewarding experience for each member.

Graphical personalised planning

Members can test their key trade-offs and immediately see the consequences. They will walk away with a written road map, reinforced by numbers and strong graphics, of their financial future that they can understand. Choice should be around lifestyle trade-offs, not just investments. The vital questions they will have answered are: ‘How do I balance my time between work, leisure and retirement? How do I determine my spending between my current and future needs and wants? Who carries my insurable risk, my family or an insurance company? How does the financial risk I need to accept to achieve my goals compare to my risk tolerance?’

Critically, members will have the tools to make informed decisions and take responsibility for outcomes within their control.

Communicate on one advice platform

By integrating all regular and ‘on demand’ communication onto a single platform with a consistent communication style and message, members will become familiar with lifestyle planning and start to see the significant consequences of any change in their financial behaviour. All interactions, including generic communications, annual statements, responses to ad hoc enquiries, benefit calculations and confirmation of telephone queries can be coordinated through the platform.

An easy to use and meaningful self-directed lifestyle financial planning system will help members better manage their wealth and provide funds with a powerful and auditable web-based communication platform. When used in conjunction with an active outbound email campaign, funds can communicate with members at a fraction of the cost they are probably paying today.

The complete advice platform must be scaleable across all member segments, demographics and locations. It must work as well for the 20-year-old starting her first job as for the 50-year-old planning retirement and the 70-year-old doing his budget. It must communicate in words, pictures and numbers.

One of the principal challenges for super funds is to extend their relationship with members beyond their traditional exit at retirement by providing them with an ‘end to end’ offering. A ‘permission’ based process allows members to act independently or seek assistance as their needs move from broad general information to help in goal setting and data input into the planning software, to help in implementation of their financial plan. In this model, ‘complex’ and ‘structured’ individual financial planning services are more likely to be fixed price and paid for individually.

Retirement income streams, non-super investments and other personal finance products must also integrate into the advice and communication platform whenever possible to complete the value proposition to members. Integrating debt and personal investment information will create the ability to see the consequences, for instance, of debt consolidation, which may enable a member to retire earlier than originally planned.

For many funds, a major product gap exists in the provision of non-superannuation investment products for members. The new generation personal portfolio administration services (PAS) and separately managed accounts (SMAs) deliver readily integrated, tax efficient, low and in some cases fixed cost investment solutions.

Many super funds will find these alternatives to managed funds attractive options to further differentiate their member offers.

The way forward

Many funds have a major service gap in the provision of financial literacy and self-directed ‘planning’ to members. The right advice and communication platform will help retain members in a mutually rewarding lifetime relationship that acts to bind the administration and the product offers together during and beyond their exit.

There are only two long-term sustainable strategies that can be adopted by competitors in any market; they can either be market leading low cost providers or niche, value added service providers.

Most industry funds will fall into the latter category. Adding value will never be simpler or cheaper because the web enables personalised, industrial strength interactions and services.

A proactive and integrated advice platform meets member needs from the time they join the fund right through to retirement and beyond. At its core is a self-help financial planning system and communication platform designed to engage and retain members.

It delivers ‘mass intimacy’ — a consistent, highly personal and valuable member experience that will be a super fund’s best defence against the blandishments of external financial planning providers and other competitors.

Paul Resnik has been involved in superannuation education and innovation for almost 25 years. You can see a vision of the future at www.c2myfinances.com.au.