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Why mismanage super?

Consider This Challenge

The management of super has progressively become more and more demanding in the past two decades and current trends would suggest it will only become more and more complicated for employers. 

Nowadays most people in responsible positions often find out after the fact what they were responsible for. I would argue that most people are actually doing their best, even in the financial services industry, only to find out they were not meeting the poorly defined expectations of the regulator after all. 

This is particularly true for employer super.

  • Let's talk about the right super fit for your employees.

The Players Around Employer Super

There has been a significant market confrontation around super for some decades but never as obvious as it is now.  It would appear that, despite more and more attempts to regulate super, the government has never actually managed to control the behaviour of service providers.  The simple truth is that any government initiative involving a huge pot of money will attract the “flies” who intend to earn as much off the asset as they can for doing as little as possible. The government continues to regulate, but the flies adapt. 

So now we’re at a place where the government is postulating the belief that they are the only organisation with the integrity required not to steal from the asset. It appears that the government is intent on proving this by reducing the number of MySuper Investment Defaults to a single option, being the Australian Future Fund.

Then you have that segment of the employer super market that creates and maintains products, sometimes referred to as platforms as there is a combination of record keeping and the provision of insurance cover. All platforms promise the best and actually mask the deficiencies in their model. There are promises of excellence in terms of service but when examined, the platform’s definition of service amounts to no more than administrative support. For platforms, their main focus is revenue generation and not excellence in terms of the value being delivered.  

When one platform was queried about their peer group performance some years ago, they all but laughed at the suggestion that “client’s best interests” actually has a meaning. 

The Good Employer Role

I feel even the title of this paragraph is already controversial.  When it comes to their employees’ super asset, what is the role of the good employer?

The predominant employer attitude at present is that it is not a priority, often it’s in the “we are too busy” queue.

In establishing any supervision of this employer funded employee entitlement, responsibility for an employer plan is usually delegated to someone who does not make decisions. The employer’s sole source of input is their service provider who is to be credited with excellent marketing skills in retaining their employer clients.  In effect, most employers see the management of their employer super plan as, at best, a second tier priority and changes only eventuate when a more informed and effective manager is recruited to reconstitute what should be the predominant approach in managing this super significant employee benefit.

How Does Management Manage Super?

Current management psychology around many issues are dominated by politics and divided opinion, sometimes referred to as vested interests.  So no one directly involved with employer super is actually contributing responsibly in terms of managing their employee’s super as a wealth creation strategy to fund their future retirement.  The employer should be holding their platform accountable for performance but they don’t know how to do this.

It doesn’t help that platforms report in a manner which impresses the listener and suppresses questions. When one major platform was asked by a major employer to report to the dollar the revenue earned from their employer super plan, the platform refused to provide the information and actually said they were insulted by the question. On being advised of this by the platform, I explained that I drafted the question for the manager concerned and their reaction only did more damage to an already fragile relationship. 

Platforms prefer to manage you and they are to be credited for adopting excellent techniques in managing their employer clients.

Sales and Service Models

Both sales and service models for employer super are going through a period of enforced change, partly because of new regulations and controls and then brought about by market rationalisation.  Considering the scale of super and then its importance at individual level, you would think that some personal service at an individual level would exist. Yes you can contact the call centre but do not expect to access advice of any value in optimising the asset. 

Like the APRA Heatmap, employers should be considering what measurement is used to fashion a key performance outcome applicable to each employee. Then again, I do believe the good employer can come up with a more effective measure of value than the APRA Heatmap.

If the key performance outcome is optimising the asset to provide a targeted lifestyle in retirement at an individual account level, why would each employer not ask for a peer group comparison of projected income in retirement, based upon performance over a 1/3/5 year period? 

Every employer needs to ask themselves how often they have failed to hold a supplier accountable?

Get in Touch

Feel free to contact me at harry.burke@axisfg.com.au and have a look through our website and LinkedIn page for more information.


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.

Testimonials

Mitsui & Co. (Australia) Ltd engaged AXIS Financial Group in reviewing the existing employer super arrangements and clarifying which product provider might be best for Mitsui & Co. (Australia) Ltd and it’s group of companies.

AXIS Financial Group provided a concise explanation as to who might be best and why, in particular ensuring that the internal project team had the information to feel confident as decisions were made. The project team moved from arguably being daunted by the prospect of improving this particular employer funded employee entitlement and better understood how to manage super as a remuneration benefit through the detailed analysis and explanation provided by AXIS Financial Group

Antony Auliso
General Manager - Human Resources Division
Mitsui & Co. (Australia) Ltd

I want to thank AXIS Financial Group for their efforts in handling insurance claims on behalf of the employees of WesTrac. From the moment AXIS Financial Group were appointed to the task, they moved so seamlessly into position and have made sure that WesTrac is not only better serviced as a result but also more informed about claims progress. I also note the outstanding results achieved by AXIS with respect to marketing and placement of our employer super policy.

It seems nothing is a problem for the AXIS team and I would commend all employers to consider this service.

Gary Carter
Group Insurance Manager
WesTrac Pty Ltd

AXIS Financial Group’s knowledge of employer super is second to none.

DXC tasked AXIS Financial Group with consolidating multiple superannuation funds to a
single company-wide default fund. They delivered, displaying superior knowledge of their
industry, along with the highest level of service and diligence.
From start to finish – the initial analysis of our previous funds, the detailed tender process,
the transition to our new fund, and post-transition – AXIS Financial Group always made
themselves available for support.
We strongly recommend speaking to AXIS Financial Group for all matters relating to
employer super.

Michael McGoldrick
Director, Compensation Asia Pacific
DXC Technology