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?
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