Super is indeed one of the major missed opportunities for most employers in their attempt to change the dialogue between employer and employee to one of common interest.
Where Does Employer Super Fit In?
Super in its totality has been a problem since its introduction almost 30 years ago. Every time the government decides to examine various aspects of the financial services industry, there is another raft of regulation imposed upon an asset which therefore appears to be badly set up, developed and managed.
The frequency and volume of re-regulation around super in itself suggests that it has never been fixed and will continue to be a problem.
What’s the Problem with Corporate Super?
We all have a share in what is going on around super as a personal asset fully funded by your employer. So, who is doing the wrong thing or sometimes not quite the right thing?
o Financial services companies that sell product but do not fulfil their service promises
o Employers who do not have the internal expertise to manage super, nor do they access a qualified service to assist them.
o The most dominant adviser models involve financial planning and accountants, all of which are expensive and out of reach for most employees
Interesting & Undisputed Facts
AXIS provides an initial service to employers involving a clear analysis of the current arrangement, known as a Service Model Analysis. This involves asking your product provider to complete and return a questionnaire to AXIS examining their value proposition and how it has been delivered. One has to understand the nature of the problem and what might be the appropriate solution as distinct from changing your product provider but not fixing the actual problem.
The Service Model Analysis examines:
- Your Product Provider’s Value Proposition
Usually promises actions by the product provider which will lead to optimisation of individual balances.
- Employer Service Promises
There are promises of a dedicated relationship manager who is supposed to organise an annual strategy meeting to agree what are the service targets for the next 12 months. Clearly such performance targets should be monitored and reported on.
- Employee Service Promises
Generally speaking, employees are offered general advice as distinct from personal scaled advice as members of the corporate plan. The distinction between general and personal advice is never made clear. Master trusts have a different sales model (as distinct from service model) and most see corporate super as a farm from which they harvest high value financial planning clients from.
- Own Product
All product is designed with the product provider’s revenue in mind. Product providers do not fully disclose the revenue raising structure within their product. Armed with some additional information you can examine the product provider’s sales model and understand how they manage their own profit generation in spite of them failing the expectations of most plan members.
- Service KPI’s
Product providers will not want to report anything that shows them up in a negative light. You have to know what makes a difference for super to be regarded as a remuneration benefit of high quality. Every individual in a workforce should have an effective service structure around their individual super account:
o Know your product and understand the fees and premiums
o Know your goals and objectives in terms of age of retirement and planned income in retirement
o Understand the importance of having measures that give you control in examining asset performance
o Make sure you have an appropriate strategy for both your level of contribution and also your investment return
- Erosion of Contributions
Fees within a corporate plan do erode each employee’s annual contribution and every employer appreciates knowing who is most affected.
Only a small proportion of any working population want holistic financial advice and most people are between misinformed and uninformed about their super. Employers do have an opportunity to discover what is required to understand super as a superior remuneration benefit and consider what level of service model best suits their workforce.
Product providers only create a product and that has become the limiting factor in their definition of service. Most employers perceive some benefit in having a corporate plan but most employers do not know how to derive the optimal benefit in terms of value delivered to each individual employee.