Scaled financial advice will be the driving force for member engagement in 2012, writes Jye Tucker.
As an industry, we want Australians to take more interest in their retirement savings. Yet it seems that despite our best efforts, the population’s apathy is a tough nut to crack.
Every major fund has teams dedicated to educating and informing members, and many funds already provide great online member tools and resources.
So why aren’t more Australians getting involved with their superannuation earlier in life, when they have more power to improve their retirement?
The answer lies within basic human psychology. We prefer immediate gains over long-term benefits – even if long-term benefits are greater.
Although most people know that contributing to superannuation is a good thing for the long-term, we haven’t provided enough short-term feedback to make retirement saving activities interactive and immediately rewarding.
The result is most Australians don’t become active with their superannuation until their retirement truly becomes immediate – which is unfortunately when they have minimal power to influence their future lifestyle.
But every now and then, the rules of the game change. Scaled financial advice and its accompanying technology have given us the tools to make superannuation advice free and personal, and to provide instant gratification around strategy benefits.
We can now use technology to show people what kind of lifestyle they can expect in retirement, which gives them a basis for comparison to their lifestyle today.
The combination of financial advice and its supporting technology allows better engagement with members and immediate feedback on the activities they do today.
To do this, we can use technology to change member engagement in three key ways.
Replace general education with personalised projections
Historically, it has been impossible to give hundreds of thousands of members personal reasons to engage with their superannuation.
The industry has instead sent members statements and communications that attempt to educate them generally on superannuation, tax law and investment strategy, hoping they make a connection between these complex rules and a nebulous financial gain that is many years away.
Now, we can motivate members by giving them immediate quantifiable feedback on how a strategy will benefit them personally.
Instead of telling them why superannuation is a “good investment,” we can tell them how much they need to contribute each fortnight to achieve a comfortable retirement lifestyle through their life expectancy.
Also, we can tell them what kind of lifestyle they can expect if they take no action. Then, they can make an informed decision as to whether that fortnightly sacrifice is worth it.
We can tell a 35 year-old that contributing just $150 per fortnight could give her a comfortable retirement lifestyle through to age 89 rather than a dependence on the age pension starting at age 75.
We can tell a 55 year-old that a transition-to-retirement strategy could net him an extra $10,000 per year through to age 86 at no cost except the time it takes to fill out a few forms.
Make scaled financial advice tools accessible to members
No fund is geared to support phone consultations with every one of its members. If we want to reach them all, we have to make the first move with technology.
As the current working population ages, the expectation for self-service online tools will continue to increase.
If a member can log on and run ‘what-if’ scenarios, they are more likely to pursue the strategy. Members who wish to pursue a simple strategy should be able to implement it online. Members whose situations are more complex should be led to a financial adviser or call centre team.
Give members instant gratification
When a member implements a strategy such as consolidating funds or contributing more to superannuation, scaled financial advice technology can now give them immediate positive feedback.
We now have the tools to give each member an interactive living retirement plan to show them how they are tracking compared to their desired retirement lifestyle.
For example, if they implement a strategy that gets them an expected retirement income of 75 per cent of their current income, we can tell them that they are likely to have a disposable income similar to what they had whilst working.
If they implement a strategy to get an expected retirement income at the ASFA-comfortable level, then we can tell them that they should be able to enjoy a broad range of activities in retirement.
A comparison of lifestyles is much more tangible than a balance or income projection – it allows them to translate their dollars to their future happiness.
When each member can see, in terms of lifestyle, how much a strategy could help them, they have sufficient information to decide whether a strategy is worth it.
A lifestyle is something everyone has now, and most of us want to either keep it the same or improve it.
By showing members how their actions today can translate to tomorrow’s lifestyle, we give them the motivation to contribute more to superannuation earlier in life, take advantage of transition to retirement as soon as they reach preservation age, or think twice about taking their entire super as a lump sum.
The impact of sensationalist headlines around market downturns will be softened if we can effectively communicate how little impact they have on each member’s retirement lifestyle.
Technology now allows us to give working Australians the information they need to make informed decisions about their superannuation, no matter what their age.
In the 1990s, the internet created new ways to interact with members and drove the superannuation industry to provide online access.
In 2012, maturing scaled financial advice technology lets us deliver personal motivation to millions.
Instead of trying to make financial experts out of the entire working population, let’s give each of them a personal incentive to interact with their superannuation now.
Jye Tucker is a director of Provisio Technologies.
