If perspectives on member movement following choice of fund’s introduction are put aside, the current Australian superannuation landscape is more competitive than ever.
Industry experts agree that it has been choice itself as well as industry-wide consolidation that have fueled this new environment. The key differentiator, according to Iain Dunstan, chief executive of Bravura Solutions, may lie in technology and the efficiency to be gained from it.
Dunstan said that with the advent of choice, there had been major inroads made in terms of fund efficiency.
“All the major players in technology provision are spending large amounts of time, effort and capital on delivering efficiency to their clients,” he said.
Dunstan went on to say that efficiency was always a prime focus for funds and administrators, with increased efficiency meaning, without exception, decreased costs.
Bob Luff, business development manager for InfoComp, has also witnessed good overall improvements in fund efficiency.
“There is no doubt that platforms and large retail managers are operating much better today than they were 10 years ago,” he said. “This has mostly been due to generic advances in technology. But there has been a lot of attention paid to members and advisers in the past few years, and much of the increased efficiency can be attributed there as well.”
Luff added, however, that efficiency was not exclusively related to straight-through-processing (STP).
“Efficiency is a difficult thing to judge, as there are simply no metrics or empirical evidence by which to assess it,” he said. “But STP is only one part of the fight for efficiency.”
Dunstan said that he too had often heard the STP term being bandied about, and that it was getting too easy to lump everything into it.
“At the moment, STP is a catch cry in the same vein as the ‘paperless office’,” he said. “But it will still be a while before total STP is achieved. Funds and administrators should be focusing on the basic tenets of efficiency. That is, clearing house efficiency, greater web access, education and increased reporting. All of these things help and have an affect.”
Interestingly, Rory Wainer, managing director of SyncSoft, said that his company managed technology provision overseas as well as in Australia, and that overall, efficiency was much better abroad.
“Australian funds have a tendency towards using technology to replicate processes of the past,” he said. “There are individuals who are different but we often see what we call ‘layer of legacy’ systems, where there are many different applications in use but they are all legacy systems. The result is a system that can only be as fast as the slowest application.”
According to Luff, efficiency is only as good as the data that is processed.
“There have been various pure STP solutions implemented in the past,” he said. “And there have been gains to be had, but at the moment, efficiency can best be gained in other areas.”
Luff continued by saying that if retail funds alone are looked at as an example, then there are many participants involved in the paper chain — advisers, managers, members, custodians and regulators.
“To have everything automated for these participants would be nirvana,” he said. “But the task is beyond difficult, and that is where the reluctance comes from. Such change would mean implementing industry-wide improvements.”
The answer, according to Wainer, is a single all-encompassing integrated technology solution.
“Internet functionality and STP are done now,” he said. “But they aren’t done well. There is a lot of room for improvement.”
But with efficiency as the goal, and technology as the means, are the investments returning a dividend? Dunstan, Luff and Wainer each answer with a resounding “yes”.
Dunstan said Bravura was by and large seeing quick paybacks in return for a fund or administrator’s initial financial outlay.
“The advantages are gained almost immediately,” he said. “When you are talking about large amounts of money and a large volume of members, then any increase in efficiency means a quick payback.”
Wainer said that it was important to realise that technology costs are a fraction of what they were five years ago, and one tenth of what they were ten years ago.
“For example, SyncSoft recently implemented 15 systems at a cost that would have been representative of two systems a few years ago,” he said. “Technology implementation must be based on the business case, but the maths always works.”
Luff looks at the returns funds and administrators may or may not be seeing for their technology investment in a slightly different way. He said that the short answer was that the return was probably there.
“Nowadays, platforms are a massive component of what funds and administrators do,” Luff said. “Those same funds and administrators couldn’t have such systems and platforms without significant investment in technology, and so we must assume that they are happy. If such were not the case, I don’t think we would be seeing the continued platform growth that is in evidence. The returns are clearly there in some areas.
“The issue revolves less around whether funds and administrators see returns, and more around the fact that they would like to see them faster.”
“Investment in technology needs to be consistent, and not once every ten years as used to be sufficient,” he said. “But if the investment is there, they know that the returns will come.”
However, it seems that increasing technology investment is but one of the means by which funds and administrators are seeking to ensure their edge over the competition. Recent movements in the client bases of technology providers prove that there is more than one way to skin a cat.
Dunstan believes that there are multiple reasons for the recent shifts.
“The two main factors involved are choice of fund and the consolidation occurring amongst technology providers to mirror the superannuation industry itself,” he said. “Technology provision is expensive, due to legislative requirements, the technology itself, market trends, and the capital required. And you need all of these to be successful. If a fund is with one of the smaller players, they are probably falling off the pace and looking to take their business elsewhere.”
According to Luff, choice has definitely been a driver for change and technology investment, but he said that it is more likely to have been in an indirect manner.
“When looking at Asteron’s recent adoption of our Composer platform exclusively, I believe that it was more about becoming more efficient as a business,” he said. “If it was a reaction, it was in response to competitive pressures, but more likely it was a strategic approach.” Wainer said that it came back to efficiency once more.
“It is sensible to move to exclusivity,” he said. “As a fund or administrator you don’t want multiple vendors. It is far better to have a good solid relationship with one vendor and cut the cost of ownership.”
Strangely, the various movements that have recently occurred within the superannuation technology market have not been restricted to movement by funds between providers. Recent acquisitions by Bravura would seem to show that providers are not restricted to organic growth alone.
