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.
The Impact of Increasing Regulation
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.
The Default Service Model
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 Subtle Differences
The differences in service model for corporate super are not often explained:
- Corporate super is often tendered to market with costs and can be more competitive as a result
- Corporate super provides insurance cover at group rates without underwriting
- Some MySuper defaults are subject to market valuation while others have a higher proportion of direct or illiquid assets, all of which are not subject to market valuation
- Assets subject to market valuation are re-valued on a daily basis while direct or illiquid asset are subject to periodic revaluation and therefore asset values might lag the market
- Some products have life cycles or life stages as their MySuper Default, and others don’t
- Some products have a good investment options and others don’t, a factor that gives you the option to take more control of your investment strategy
- Some products only provide a general service to their product population, some tailor to their plan population, and none set out to fully service their clients at individual level
Super Service
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.
Active Servicing
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”?
Want to find a better way to approach corporate super? Contact us today.
