Sales versus service models
The first thing to do with any employee benefit, including super, is to measure the value being delivered by your current super service provider. In most instances, the primary source of information for medium to large-sized employers is usually the platform itself.
Unfortunately, nowadays it is most often Reward & Benefit Managers who are responsible for company super. Unfortunately, Reward and Benefit Managers are not key decision makers and rarely have the influence or expertise required to capitalise on super as a benefit within their organisation.
Super providers go to great lengths to emphasise how great they are and to frame their service delivery as highly successful. They present proof of their sales model, showcasing why they should keep your business – and Reward & Benefit Managers have little ability to discern otherwise. Super is a complicated field, and investigating super requires an understanding of the industry.
What you need to understand
Super is not about past performance. It’s actually future capability that matters most. Therefore, at AXIS, we look to pose a series of questions to your platform to determine whether they are offering superior value or empty false promises. We recommend to our clients to keep in mind that media reports, headlines and opinion pieces take no responsibility for the information provided. We would caution against consuming this information as fact, believing wholeheartedly in what is being reported. Also, it is highly unlikely that these unreliable sources will successfully predict superior investment results.
Key takeaway: When reading communications, question and interrogate the method used to arrive at any bold claims around the quality of investments and the method of valuation.
Where to from here…?
Whoever is responsible in your organisation for managing super as an employee benefit must investigate the current arrangements – examining how well it is operating and delivering value. Although you may think you already have developed a researched opinion, most employers do not know what to ask their current provider to challenge them around the value delivered.
Most of the indicators are actually within your existing super arrangement if you actually know where to look:
- How many of your employees have a goal/aim for their super?
- How many of your employees are salary sacrificing and from what age?
- How many of your employees are in the MySuper investment default option?
- What is the relative performance of the current MySuper’s option versus others in optimising super as a remuneration benefit?
- What are the various MySuper designs and is this one best of breed?
- What proportion of the population has developed their own investment strategy?
- How many of your older employees are excessively exposed to growth assets in a fragile market?
- How many of your employees have accumulated a sizable asset after age 50 but still have insurance?
- How many of your employees have not nominated a binding, non-lapsing death benefit?
Why does this all matter?
Traditionally, all platform providers pay more attention to their sales model rather than the limitations in the value their service model offers at an individual account level.
Since 2010, we have directly engaged in this conversation around the value delivered by employer super at the individual account level. Yet still, as recently as 2018, another new senior executive of a major platform stated it is too expensive to deliver a meaningful service at an individual account level.
The flaws in servicing are apparent but the Royal Commission of 2018 paid no attention to the value lost by the standard servicing model as operated by all platforms and simply highlighted areas where compensation was due without proper scrutiny of the balance between platform sales models versus the flaws in their ongoing service models.
What can you do?
Hopefully, you are curious enough to want to understand more. You have the option of asking some pointed questions of your current provider to discover their definition of value or, better yet, ask us to do it for you!
If you need help or have questions, please contact AXIS on advice@axisfg.com.au, or get in touch with Roy or Richard directly on 1800 467 467.
___
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.
