Self-reporting is widely recognised as the worst source of information to assess a supplier’s performance.
What measures might be best?
The first consideration can be put very simply as “deciding what you need to know”. This phrase is relevant when deciding whether any company cost is being incurred with an eye for the perfect result. There is no other product or service provider that an employer would source and then manage the way they do their super providers.
Ideally everyone wants the best quality that money can buy but when most employers choose their super provider, very little attention is paid to the fact that it is a decision that will be a long term choice and one that needs to be successful over time. Most are under-informed about what they are actually buying. All platforms promise the best of everything:
- The provision of a product to register changes in a client’s balance
- Functionality within the product
- A default investment strategy if the employee does not use the investment choice menu
- Access to investment markets, globally and by asset class, through an investment choice menu
- Competitive group insurance policies with no proof of health required
- Access to a call centre to answer questions
- Website access to their account
- Tools available on the product provider’s website
- Regular publications and notifications and even events
While the list is very standard across different products, there are variations in the quality around what you are actually buying. There is a commercial saying that “if you are paid to do a job, deliver it”.
False Branding
Every platform in employer super targeting medium to large sized employers promise to either optimise or maximise your employees super.
The measure that should be used as an overview of performance is projected income in retirement. The majority of employees remain in the provider’s MySuper Investment Default for far too long, most retain their insurance well into their 50’s and even 60’s and most do not have a valid nomination of beneficiary. No platform provider has a system of delivering on what they consider a “perfectly serviced account” and most do not provide a framework for the employee to examine their current product’s performance against their peer group.
Most forward thinking platforms have a program of selling and retention, a practice quite distinct from quality servicing and the delivery of personal scaled advice at an individual account level with the intention of optimising an employee’s projected income in retirement.
If everything observed and said since the Royal Commission in 2018 is meant to change the false service culture of the financial services industry, employers have a major role to play in holding super providers accountable for their management of the accumulated employee asset.
It’s not easy but it is worthwhile!
I am sure we all have experience in problem solving and change management and we all know how trying it can be. However, it has to be observed that super is among the worst managed assets in Australia and so many employees own a part of it.
In an actual tender conducted by AXIS, the following comparison was submitted as one of the perspectives around what was current and what was actually possible if the challenge was properly analysed and understood:
| Projected income in retirement – Based on MySuper Default* |
| |
Platform 1 |
Platform 2 |
Platform 3 |
Platform 4 |
| Young |
$34,000 |
$33,700 |
$32,900 |
$34,700 |
| Middle |
$33,400 |
$33,200 |
$32,200 |
$33,200 |
| Old |
$32,200 |
$32,000 |
$30,900 |
$31,000 |
TABLE 1
|
Projected income in retirement – Available from the Investment Choice Menu*
|
| |
Platform 1 |
Platform 2 |
Platform 3 |
Platform 4 |
| Young |
$45,000 |
$41,200 |
$43,100 |
$47,000 |
| Middle |
$41,200 |
$38,700 |
$40,000 |
$42,200 |
| Old |
$31,800 |
$31,700 |
$31,500 |
$30,200 |
TABLE 2
* The projection is just an estimate, not a guarantee. The actual money you receive in your retirement may be very different from this estimate and can be impacted by a number of factors such as the investment option you choose, investment returns, fees, contribution levels, withdrawals etc. Amounts shown are in today’s dollars and exclude any non-superannuation assets or entitlement to age pension. Current tax and superannuation laws remain unchanged.
Assumptions: https://www.axisfg.com.au/june2020assumptions/
The missed opportunity is quite stark but arguably, as you can now see the numbers, you must ask the question of your current service providers.
On the other hand, feel free to make contact with AXIS Financial Group by email consulting@axisfg.com.au or FreeCall 1800 111 299 and ask for either Roy or Richard.
