Despite the insistence of the leaders of the world’s most successful companies that customer engagement is key – Bezos’ approach is a common refrain amongst tech and retail monoliths – superannuation funds are struggling to crack the puzzle of member engagement.
This isn’t problematic to just their businesses either, although it’s increasingly proving an issue there too. It’s also an issue from the perspective of the health of the superannuation system, as poor engagement runs the risk of damaging the returns, adequacy of insurance cover, and ultimately the retirements of Australians.
So, where does the problem start?
According to start-up super fund Zuper (which has impressive member engagement compared to more traditional funds) co-founder and chief executive, Jess Ellerm, “to get to the heart of the issue, you have to understand that superannuation funds, from the get-go, were never designed to engage with their members for the majority of their working life”.
By this, she means that the model of superannuation for decades was intended to bypass the individual and go straight to the employer to make a decision about fund choice on their behalf.
Further reasons, the Productivity Commission (PC) found in its 2018 report into the competitiveness and efficiency of the super system, include the compulsory nature of super, its complexities, costs of engaging, the presence of intermediaries and trustees that are charged with acting in members’ best interests, and behavioural biases that affect people’s decisions about their retirement savings.
This last aspect in particular is often cited by funds struggling to engage members, as ‘future discounting’ makes members more likely to focus on spending and saving decisions that will impact their current life rather than those that will contribute to a far-off retirement.
For funds wanting to both provide the best outcomes for members – an area being watched with hawk-like tendencies from regulators currently – and to remain competitive in an area that consumers are slowly but surely subjecting to the same expectations for engagement that they do other products and services, overcoming these obstacles is a key concern.
Improving engagement is a necessity
There’s a number of macro factors at play that mean that, in addition to the basic goal of simply providing good services, funds need to push on with improving engagement.
The default superannuation system has been earmarked for a shake-up by both the Productivity Commission and the Morrison Government, meaning funds that have previously been reliant on their default status to obtain and retain members will feel the pressure of more member choice.
Fintech providers may also push change, as digital-only entrants to banking and other services already have, as members will potentially see the low-cost of such offerings as worth the trade-off if they’re not receiving much benefit in terms of member service from their current funds anyway.
Then, according to KPMG’s most recent Super Insights Report, service and product differentiation will be key to fund growth and, again, comes back to member engagement.
“Whilst the core super product is being commoditised, the service provided to members should be a key differentiator,” the report found. “Members are seeking and needing additional services and products beyond basic super and standardised insurance agreements, and are expecting to be well-informed about choices.”
Turning to technology
As with most problems faced by the superannuation industry, technology will prove both a help and hindrance in improving member communications. While it will allow for better and faster engagement with members, it has also, as Ellerm suggested, increased consumer expectations in their experiences with service and product providers.
Technology has already changed how members interact with funds; according to member and fund surveys from the PC, fund websites are by far the most popular means of contacting funds, followed by call centres.
“The mode of communicating has become quicker and more convenient, and the fact that we are now able to measure these interactions allows us to refine our communications to become more targeted,” NGS Super head of brand and marketing, Melissa Adam, told Super Review, noting that the fund is now able to create a single view of its members.
For NGS Super, its key focus in improving member engagement is making superannuation easy to understand and the fund easier to interact through its marketing material and servicing model. The commonality between these two means? Both are enabled by tech.
Technology also allows greater data analysis, so information about members’ savings, spending and possible retirement needs can be pulled together. This can then provide information to members that both helps them understand their superannuation and, ideally, makes their retirement needs more tangible to lessen the effect of future discounting on engagement.
“Today, the power of data and insights to help someone make great choices and decisions about money is incredible, and that extends to super and the member best outcomes conversation,” Ellerm says.
Robo-advice too, is an area where technology can help improve engagement, as it enables funds to meet members’ more basic advice needs cheaply and quickly. It is proving contentious whether this qualifies as advice, or indeed whether it prompts active participation from members, but could be one string in funds’ member engagement bows.
Engaging members in investment decisions
There’s a valid argument that engagement needs to go beyond members seeing and understanding their investments, to them having a role in deciding them. Consumers are increasingly voting with their feet where ethical investments are concerned, and the rise of financial literacy books, apps and podcasts has grown awareness of different strategies.
Furthermore, as Ellerm argues, “good returns should be a given, not what you build your entire business and proposition around.”
“Returns are important, but it has become the only thing super funds ever talk about, and it’s talked about in vacuum,” she says. “I think the industry as a whole is responsible for this dumbing down of the conversation about money, which has dampened engagement.”
As a result, for Zuper, the first step in member engagement is giving people control, choice and transparency over how their money is invested, and it results in active involvement from members. Over 70 per cent of Zuper members, for example, add a technology, health or green investment tilt to their core portfolio.
Not all engagement is created equal
What matters more than the level of engagement however, is how informed and in-depth that engagement is. This is particularly evident amongst indigenous Australians, many of whom aren’t aware they have multiple superaccounts, let alone what is happening within them.
“For those who want to be engaged, it is informed engagement that matters. Around 30 per cent of members have low financial literacy, and while most members know the ‘basics’ of super, many lack the understanding needed for informed engagement,” the Productivity Commission wrote in its final report.
Part of this, the PC believed, could come from members receiving better, rather than more, information. Product dashboards are an obvious way to achieve this, with all relevant information being contained on one place that is both easy to understand and access, as is greater data transparency.
On the former, the PC flagged dashboards were a work in progress, suffering from “the pursuit of false protection at the expense of the possible”. To effectively engage and communicate with members, they need to be “salient, simple and accessible – and most are not”.
Further, most engagement with funds tends to be passive.Members may monitor their fund’s performance occasionally, for example, but don’t actively engage with it.
Passive engagement isn’t necessarily bad – it could prompt subsequent active engagement or, the PC found, could be all that members in high-performing funds need. It’s worth remembering however, that funds that claim to have high engagement may not necessarily have actively engaged members, and vice versa. And for funds wanting to follow in Amazon’s footsteps of putting the customer first, it’s both quantity and quality that matters when it comes to engagement.
