What’s next for the evolution of superannuation?
When it comes to delivering an exceptional customer experience, super providers can learn some valuable lessons from other industries, says ING DIRECT’s Lisa Claes.
It’s incredible to think that nowadays you can choose and start streaming a movie on Netflix in minutes; take delivery of an outfit from The Iconic within a couple of hours of ordering; and top up your Opal card digitally and automatically, meaning you never have to physically enter a shop to buy your ticket again.
The pace of change over the past decade has been staggering, but the reason behind it is simple– power has been shifting from producer to consumer, and customer demand has turbocharged the means and speed by which industries deliver.
The hallmarks of customer engagement
The rapid evolution of Netflix is a perfect illustration of an organisation which has managed to do this well. From my own analysis, Netflix has at its core two outstanding hallmarks of success. First, it’s low cost – offering a range of transparent pricing packages to suit a range of budgets and broad customer base. Second, Netflix is low friction – from a customer’s perspective, it’s easy to understand, operate and access across multiple channels, 24/7.
In this ‘age of the customer’, informed, engaged and self-directed consumers are the dominant force. Yet while we all operate within a variety of evolving ecosystems, it’s clear that some ecosystems evolve faster than others. Entertainment is just one industry which is leading the pack in meeting the needs of customers; the superannuation industry, in comparison, is lagging behind.
The super challenge
When we look at retirement planning, it’s obvious that the characterisations of low friction and low cost, which are core to Netflix success, cannot presently be applied to the superannuation industry. Rather, superannuation is characterised by high complexity, high cost, customer friction and disengagement.
The statistics speak for themselves: according to research by the Grattan Institute (April 2014), Australian funds charge fees that are on average three times the median OECD; while the Rice Warner research commissioned by ING DIRECT revealed that annual fees of 2.33% could eat into 60% of your savings at retirement.
In 2014, Core Data revealed that at least half of all consumers are disengaged with their super, ranging from 40% disengagement amongst Baby Boomers to 68% amongst Gen Y, while joint research by the Financial Services Council and ING DIRECT (2015) found there is a clear consumer demand for improving the status quo. Approximately 70% of respondents feel their funds are not transparent enough, while 83% want greater clarity around advice, easier access to balances and info online.
A recipe for disruption
While the current situation may appear bleak, there is a positive side. For, when you look at the ingredients of complexity + cost + customer friction + disengagement, then you have a classic recipe for disruption!
Customers do not adjust their expectations when they interact with different providers - if they have an experience with Amazon or Apple then they expect the same level of experience with their superannuation. And, customers won’t change their expectations – but they will change their providers! So, if the customer holds the reins of control then we need to ask ourselves, how do we engage them? In this ‘age of the customer’, I have to again refer to Netflix as the gold standard in delivering a customer focused digital experience 24/7 and ask, wouldn’t it be good if we could offer a similar experience through superannuation?
The heart of the customer’s ecosystem
Like Netflix, superannuation needs to work towards becoming the heart of a customer’s ecosystem – a wealth ecosystem characterised by:
- Transparency – a dashboard which delivers consumers an overall picture of their super, perhaps even combined with their other assets
- Self-direction – people want to take control, we need to make it easier for them to do so
- Comparison – so individuals can compare their own financial situation with their cohorts
- Validation – a way of validating their decisions through professional advice and support when required
There’s no denying super has a lot of catching up to do in the evolution stakes – but for forward thinking fund providers who are committed to meeting the needs of, and engaging with, their customers, the opportunity is there for the taking.
AUTHOR
Partner Article
Recommended for you
While the Magnificent Seven have been a runaway success – they drove almost two-thirds of the S&P 500’s 24% return in 2023 – our view is that the largest seven companies in Australia could anchor our market in the medium term. So, how can investors diversify their portfolios and make better returns without turning to more volatile small caps or offshore markets? The Ex-20 might be the answer.
Hybrid securities can offer investors equity-like returns, yet with a lower level of risk. Here’s a rundown on hybrids and why they are attractive investment options.
Diversified managed funds could make an ideal addition to a managed account, as the broad toolset available to the fund manager enables them to seek outperformance and manage risk, according to Allan Gray.
The number of advisers using managed accounts has exploded in recent years, often at the expense of diversified managed funds. But diversified funds deserve a place in almost any multi-asset portfolio, held either within or alongside a managed account, according to Allan Gray.
