Every industry uses a variety of service models and approaches to sell products and connect with different target markets. If we’re looking at the car industry then you can expect to see luxury cars with amazing features available, you’ll also find cheaper models with simpler features on the market to suit different demands from different consumers. Corporate super funds are no different – different service models exist to suit a variety of target audiences. So what service models can we expect to see from corporate super fund providers and how do they relate to market demand?
The corporate superannuation market is dominated by product. There are the master trusts, most owned by the banks (but not for much longer) with their array of sophisticated product options, and then there are the industry funds, with their much less complicated but often more successful products. There are also self-managed super funds, which are often marketed by accountants and sold on tax minimisation; and federal and state level government superannuation funds.
The common thread amongst all of these product providers appears to be that they base their value on just one figure, the annual investment return for their MySuper Default.
Alternatively, they promote themselves in a feel good way, as a provider who cares about you. Both options are inadequate for employers looking to deliver real value through a corporate super fund product.
The focus on product is at the detriment of service delivery, which is often delivered on a one-size-fits all basis rather than at an individual account level.
Since the introduction of super, the size of Australia’s super assets has grown at an impressive pace and so the government has continually introduced more and more regulations over the years, which has steadily increased the complexity of the regulatory framework around corporate super funds over the decades. In fact, there is some re-regulation underway now as a consequence of the fairly recent Royal Commission.
Given the volume of the regulation changes and license regimes introduced over two decades, it appears that very few of the problems have ever been fixed by each round of regulation. If past regulation has proved ineffective, it can also be argued that the underlying problem has never actually been identified and therefore more re-regulation will be necessary.
As a consequence, re-regulation has not impacted on corporate super service model design and has not improved on the lack of individual service value being delivered.
Current and past re-regulation has actually reduced the level of competition in the super market. It is important for every industry to attract new market entrants as it helps to create the market forces that ensure competitive pricing and higher quality service delivery.
However based upon current industry trends for super, all product providers have very similar service models with only superficial differences.
Corporate super as an offering is on the decline, and there is less and less competition around super services each year. The current and single default service model for corporate funds is based upon poorly explained claims around cost and investment return on MySuper investment defaults. Individual strategies and informed use of super products can significantly improve super as a wealth creation exercise but there is currently little market pressure on super products to develop an improved service standard and to engage employees in their super’s performance.
The differences in service model for corporate super are not often explained:
Each employee’s super is their personal asset and each employee has different personal circumstances. Products need to have the capability to know their individual client and therefore provide them with personally tailored advice – all the individual wants to know is that their chosen investment strategy is either outperforming the product’s MySuper Default, or alternatively they are protecting their asset if they are risk averse.
In spite of advances in technology and given discussions with various product providers, this requirement for the delivery of personal scaled advice at individual account level does not appear to be a priority for product providers.
Any ambition to service every employee in a corporate plan must be termed active servicing as distinct from the existing broad general servicing undertaken by most products. In examining active servicing as a proposition, a number of product providers were asked recently if they have a definition of the perfectly serviced account and all found this to be a new concept.
Employers should demand a higher standard from traditional corporate super fund providers and ask them to consider a new definition of service.
It would appear that normal market forces do not apply and the question needs to be asked “Why not”?
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This document was prepared and issued by AXIS Financial Group (ABN 21 092 889 579, AFSL 233680). The information contained within it is not advice. It provides general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making an investment decision. Information in this publication, which is taken from sources other than AXIS Financial Group, is believed to be accurate. However, subject to any contrary provision in any applicable law, neither AXIS Financial Group, nor its employees and directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.