Speaking at an industry event in Sydney last week, Otivo founder and chief executive Paul Feeney argued that too many super funds are content to simply provide members with a calculator and call it advice, instead of pushing for digital advice that will better help them prepare for retirement.
“There’s a difference between calculators and advice. And too often, people launch a calculator and they call it advice. It’s nothing near it,” Feeney said.
“General advice and calculators or just pure education that’s generic is wasting members’ time because you expect them to take that away and plant that over their current situation and their family and still make a well-informed decision. They’re not interested. They just want to know what to do next.
“The solution’s there, and my frustration, probably coming through my tone a little bit, is that it exists. It’s waiting for organisations to step up, and I think in corporate Australia in general, nobody wants to go first.”
However, Peter Worn, Finura Group joint managing director, argued that super funds’ hesitance is likely due, at least in part, to that fact that for executives, trustees and super funds, “there’s no reward for taking big risks”, despite the clear benefit of financial advice for retirees.
Responding to this, Chant West general manager Ian Fryer suggested that, because of how the performance of super funds and their managers is measured, there is a lack of incentive to push for digital advice.
“Superannuation fund executives are measured on things they could measure, for example, retention and all that sort of stuff. But super funds don’t exist for the purpose of retention,” Fryer said.
“They exist for the purpose of getting good member outcomes, but it’s really hard to measure that, so there’s not a clear measure, so it’s not in the KPI, so it’s not the focus, but that should absolutely be the focus. It’s the point of our whole system.
“So sadly, I think a lot of it is to do with incentives.”
While the lack of incentive may very well be playing a role in the lack of drive in this area, Worn suggested that the lack of advice advocate or chief advice officer within super fund executive teams is also responsible.
“When no one at the executive level is accountable for advice, it often takes a back seat in budget decisions, despite its critical role in delivering better member outcomes,” he said.
“Without someone at the executive table championing advice, it’s no wonder super funds are struggling to secure funding to implement digital advice.”
Where should money for investment in digital advice come from?
One key issue for super funds when it comes to implementing new digital advice offerings is the considerable investment that comes with it, however, Worn explained that they could simply redirect some of the exorbitant funds spent on advertising and football team sponsorships.
“I like the Melbourne Storm, and I like all these footy teams and it’s all good and I understand. I’m a big advocate for grassroots sports sponsorship by the way; my kids played Auskick, and I think it’s great that businesses do that,” he said.
“But one would question whether a not-for-profit super fund should be directing large amounts of sponsorship dollars to an individual sporting team. Is that truly in the best interests of all members?
“The current reality is the top 10 funds in Australia, for every dollar that gets spent on advice and member services, $1.60 gets spent on advertising and sponsorships. You tell me whether that’s out of whack.”
Fryer countered that spending on advertising and sponsorships leads to retention; however, Feeney argued that providing services like digital advice will ultimately leave members better off and therefore lead to greater retention.
“The funny thing is, retention and growth comes from when you actually help someone be better off. On our platform, 75 per cent of people who use Otivo, their advice is to put more money into super. If that doesn’t help growth I don’t know what does,” he said.
While it would seem that many super funds are still holding out, the last six months has seen three major super funds launch digital advice offerings.
In October, CFS introduced its digital advice offering, designed by Otivo, providing CFS FirstChoice members with personalised advice in relation to their CFS FirstChoice investment options, contribution strategy and insurance arrangements for $88 per annum.
Earlier this month AMP launched its new digital advice solution – Retirement Health Check –- designed in partnership with Bravura Solutions, to help members better understand their super at no additional cost.
Speaking with ifa following the event last week, AMP director of growth and customer solutions Julie Slapp confirmed that this is only phase one of AMPs digital advice offering with more expected to roll out over the coming months.
Meanwhile, last week saw UniSuper announce its intention to launch a digital advice offering for its members in partnership with Ignition Advice to help bridge the advice gap for the “missing middle”, with rollout expected in June.
it’s easy, just partner with individual advisers. Problem solved.
This article is like reading some type of paid Advertisement. If you’re just going to get a couple of CEO’s from Software companies you may as well just cut and paste a press release.