With several superannuation fund mergers in the headlines, it’s clear the sector is going through a major consolidation phase. Damien Dipietro, Executive Manager – Retail Wealth, suggests that merging funds should take the opportunity to review the technology landscape and see what else is out there.
Our superannuation sector is facing challenging times. COVID-19 and the Early Access to Superannuation scheme are having huge impacts on investments and members. At the same time, the sector is also seeing a major shift in the competitive landscape with an increase in merger & acquisition activity, including some of the bigger industry and retail players.
Currently Australia has 217 APRA-regulated superannuation funds managing $2.9 trillion in assets. A recent report from KPMG estimates that in five years’ time, this will have shrunk to 138. Recent activity in this space includes MediaSuper/CBUS and First State Super/WA Super (Aware Super) announcing planned mergers.
The report argues that increased regulatory pressure is a major factor, as is a focus on member outcomes and demand for personalised digital engagement. If newly merged funds want to see improvements in these particular areas, they need to review their technology as a matter of priority.
Doing the due diligence right
Migrating members onto the legacy platform of one of the merged funds will often seem like the easiest option, but it’s unlikely to set the new merged fund up to deliver the cost efficiencies and service differentiation required to be competitive in the new landscape.
If you are going through the due diligence process anyway as most funds will be mandated to do as part of the merger process, you have an opportunity to go beyond just a ‘tick box’ exercise. Take a serious look at what else is out there as the platforms space has evolved significantly in recent times with modern underlying tech and digital-first solutions.
We recommend focusing on your platform review on three priority areas to check that you set your new fund up with the best possible solution to deliver business and member results.
Improved operational efficiency
Despite platforms making huge advances in this area, many funds haven’t been able to take full advantage due to legacy system constraints or outdated internal processes. In our experience, funds should be aiming for at least 90% straight through processing rates, with humans only getting involved to resolve the exceptions. Paper forms, wet signatures and spreadsheets are still found throughout our sector which adds huge costs in terms of headcount, not to mention the impact on customer experience.
Implementing a modern platform can provide process efficiencies and automation which reduce operational costs and risk. Technology can also make it easier to offer new products and reach new market segments, tailoring workflows rather than developing from scratch.
It’s also advisable to choose a solution which plays well with other systems – both funds will have invested in IT estate and you won’t need to replace everything. APIs are key to true straight through processing and connectivity across your ecosystem. For example, integrating from the customer digital portal to the back office systems to the ATO gateway network to increase efficiencies and reduce cost and risk.
Engaging customer experience
Digital transformation is shaking up financial services and superannuation sector is already feeling the impact. New funds with a focus on customer experience are gaining momentum, such as our client SuperEstate who can sign new members up online and rollover their super in 90 seconds.
This is the type of experience that today’s consumers demand. The offering and service has to be seamless and intuitive. The experience must be consistent across multiple channels and devices. And it should be personalised – your members want you to understand them and to make their lives easier.
Your technology partner should provide a holistic solution that connects the front end experience through to the back office. Ideally, members could self-serve online to perform most account processes. There are also opportunities to engage members beyond just their basic transactions – using your own data on their on their attributes and behaviours, show them how your products fit into their financial landscape, how they are progressing compared to peers and what they can do to change their future.
Optimising regulatory compliance
Changing regulations keep all super funds busy – and that won’t be going away any time soon. While some deadlines have been pushed back due to COVID, coming up on the roadmap is MIGv3.0 for SMSF rollovers and the Design and Distribution Obligation.
Compliance is crucial but it shouldn’t distract from serving your members. The platform you choose should be kept up to date with regulatory change – proactively managed by the provider. They should also have strong relationships with regulatory bodies so they know what changes are coming up and can contribute to legislation on behalf of their clients.
Ideally your technology partner should include regulatory change in your licence fees. Instead of worrying about putting together business cases, getting updates done on time or dealing with the complexities of legislation, you can focus on other value-adding areas of your business.
These three areas will be key to success in the new consolidated and competitive landscape. Keep them in mind when running your technology vendor due diligence and choose a partner that has these priorities embedded in their solutions today and continued innovation plans in their future roadmap.
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Posted in: Wealth Management Administration
