Australia’s superannuation system is one of the most successful in the world. Not only is it the fourth largest in the world[i], but it has the highest rate of return in the OECD[ii]. Despite this success, many of the country’s super funds face significant threats to their viability, including poor returns, inefficient operations, inability to scale, excessive fees and an overreliance on revenue from inactive accounts.
Another major threat heading our way is the likelihood of a more challenging economic cycle. This will only add to the pressure on super funds, making investment returns and member outcomes harder to achieve.
In the face of these headwinds, super funds are under increasing pressure from the regulator to get their houses in order and to consolidate to drive scale across the system, while ensuring that any mergers don’t disadvantage members.
Our whitepaper, The digital way forward for superannuation in 2020 and beyond, discusses how to stay relevant in a world where members come first. Increasingly, super funds are looking to digital capabilities to stay ahead of the curve. Through digitization, super funds can improve member and regulatory outcomes, remain relevant, competitive and sustainable and become an acquirer—rather than a target—in a merger-rich environment.
Digital capabilities can be built by pulling levers on three fronts. These include:
- building an underlying operating model
- developing a digital member experience
- incorporating operational excellence into the heart of the firm
There are a range of operating models for provisioning member administration. First, there’s the traditional, in-house, wholly-owned model that offers a level of control because your end-to-end systems are in your hands. While it offers control, this model can be costly and disruptive to manage and upgrade. At the other end of the scale is the fully outsourced, third-party, administrative model that provides flexibility and can free you up to focus on core business. Then there are hybrid models as well as the Software as a Service model.
In terms of member experience, technology enables firms to design, maintain and evolve the member experience, including greater personalization, effective use of member data and the flexibility to create new products to meet the rapidly changing needs of the market. This experience is the face you present to the world.
The third lever relates to a firm’s ability to deliver on promises to members, manage funds effectively and allow trustees to meet compliance and governance demands. This can be summed up as the “reality” of your fund.
Essentially, technology creates the opportunity to put the super back into your super fund, and re-write your firm’s future (and that of your members). Becoming a match-fit from a digital perspective must be a priority for every fund.
To read more about how digitization can help keep your firm competitive, download our "The digital way forward for superannuation in 2020 and beyond" whitepaper.
[i] APRA Quarterly Superannuation Performance, June 2019 (issued 27 August 2019). https://www.apra.gov.au/sites/default/files/quarterly_superannuation_performance_statistics_june_2019.pdf
[ii] OECD Pension Markets in Focus, https://www.oecd.org/daf/fin/private-pensions/pensionmarketsinfocus.htm
APAC, Asset Management, Retirement