Administrators are the engines that keep superannuation funds running. And for many years, that engine was synonymous with the Link and Mercer brands.
That’s changing, and that’s not all that’s new on the administration landscape. From funds hunting for more flexible solutions, to a growing focus on data security, to increasingly rigorous tender processes, there’s much for administrators and funds alike to be considering in 2019.
New kids on the block?
The Australian administration scene poses high barriers to entry and mandates changing hands are infrequent events, so it’s little wonder it’s been a hard market for new players to break into.
Jo-Anne Bloch, a partner and leader at Mercer Administration Services and a judge in Super Review’s Women in Financial Services Awards, points to capital, technology, the small market at trustee and member level, and the high amount of regulation as restrictive.
This doesn’t mean that new players can’t try and shape the market however, and movement in mandates suggests that at least some change is happening.
Link’s administration revenue, for example, declined by three per cent in the first half of this financial year, according it its Australian Securities Exchange (ASX) reporting, with the loss coming from lost mandates.
The company told the ASX however, that these losses had been somewhat offset by strong annual member growth of its five largest clients of around 4.8 per cent, with overall annual member growth of 3.6 per cent.
Tech Mahindra is one of the biggest names trying to move into this space. The India-based company has been in Australia since 1998, providing IT support for both banking, financial services and insurance companies and other verticals, as well as providing technology for Link.
A couple of years ago, it forayed into the administration space alone. Tech Mahindra first created a delivery centre to support its first admin client, then helped its second client on a larger scale by transforming the fund’s underlying admin technology, migrating them to new-age infra and applications.
“For [too] long the market has been looking for a competitive administration service with [a] differentiated offering which is a paradigm shift to the way the administration market has been functioning,” Tech Mahindra’s country head, Australia and New Zealand, Jeff Ferdinands, says.
“Bigger contracts have been moving majorly between two players with little option. A $2.3 trillion market needs more competition to bring the best of our services for our members and advisers.”
Given the increasing role of technology in meeting super funds’ needs, it’s unsurprising that the first big player to make a move on the admin scene is originally an IT company.
“We’ve seen fintech enter the fray and there will be others making advancements in simplification, the member experience, and technology enablement,” Bloch says. “Artificial intelligence and virtual reality will no doubt play a role in making it easier to manage your super [and] to envision your future.”
It’s worth considering that some of the new players could turn out to be the super funds themselves.
Increasing numbers of funds are either self-administrating or scaling back the operations they receive from their administrators to do a higher portion themselves.
Sunsuper is one of the largest funds to do so, making the shift in 2008, and it cites improvements both strategically and to member experience as two of the main benefits it’s seen in the decade since.
“The decision to insource administration has provided a number of strategic benefits … [has] allowed tighter integration between service, marketing and technology,” the fund’s executive general manager, customer engagement, Danielle Mair, says.
“Insourcing has enabled the redesign of the business around our customers and the execution of our customer-to-core strategy. This leverages data-driven insights and design thinking to create new value to our customers and Sunsuper, which is not easily replicated by competitors.
“In an industry which has homogenous products and technology which can be replicated, service experience is critical. Self-administration creates the foundations for scale as solutions and services are designed with a singular purpose.”
There are obstacles to self-administrating – for example, Mair says that aligning the purpose, values and culture of the previously separate organisations required strong leadership and is still an ongoing focus. For funds hunting autonomy and control however, the appeal is understandable.
What do funds want anyway?
More than anything, funds seem to want an offering that goes beyond that of a prescribed administration service. They instead want a ‘chop and choose’ style menu of services that funds can then select or tweak to meet their strategic objectives.
The ability to have control and choice is particularly important as funds seek to differentiate themselves in a crowded marketplace (as, while some funds are heading for the exit, new fintech-style ones are popping up).
“Funds are increasingly looking for an administration service provider who is able to let the fund retain full control of the member and employer experience, support them with the flexibility of modular service offerings and enable the fund to literally design their own solutions and customer experience, all while being cost-competitive,” Link Group managing director, John McMurtrie, says.
Indeed, McMurtrie says that Link’s ability to change its offering in line with the market’s own changing expectations in this regard has been key to the administrator remaining competitive.
The company has introduced a more flexible technology ecosystem, for example, that’s adaptable to clients’ needs as they work to deliver new and unique member experiences.
In terms of practical concerns, unsurprisingly given the slew of possible regulation and recommendations in the life insurance space, super funds want support from their administrators with insurance.
“At the top of the list [of funds’ wants] is insurance, that is, Code compliance and improving the member experience, claims management, complaints and incidents related to insurance,” Bloch says.
Then funds want to strengthen the member experience across the value chain: they want to “onboard, retain, delight, improve transactions and the way we interface,” Bloch says. As funds increase their staffing levels to take on more of the customer interface, funds are also wanting to connect more seamlessly with administrators.
Finally, there’s technology. McMurtrie points to fraud and information security as a key concern for funds.
“Until recently, the super pool has been relatively immune to fraud and cyber security hacks. No more,” he says.
“We support our funds by providing a secure IT and data environment, able to withstand external intrusions. This secure environment is of critical importance, especially as the technology ecosystem of this industry continues to expand and grow by the day.”
Tech Mahindra too, points out data security as a focus for the company. While the company is based in India, none of the data for its administration clients leaves Australia.
Then there’s leveraging tech to improve the member experience. With ASOS, Amazon and other online retailers changing the face of customer service with such strong business success, it’s natural that super funds want to get in on this trend.
Bloch says funds increasingly want to utilise technology to create an experience akin to online shopping: “The less you need to interact with the fund the better it is for all, and if you do, make it easy, simple and convenient, and when it suits the member.”
Admin’s part in a watershed year
As one part of an industry in the midst of serious self-reflection and scrutiny, administrators agree that they will feel some impacts from last year’s Banking Royal Commission.
Bloch says that both the Royal Commission and to some extent the Productivity Commission will impact administrators as they seek to help clients meet the recommendations. The proposals around Banking Executive Accountability Regime (BEAR), governance, competitiveness, and the member outcomes test stick out as areas where support will be needed.
“We will be at the heart of how trustees evolve to deliver best outcomes for their members,” Bloch says.
McMurtrie also anticipates the inevitable regulatory fallout of the Royal Commission’s final report will impact the administration landscape, with possible implications including changes to the traditional retail trustee and admin independence model, a consolidation of super providers, self-administered funds looking to change their operating model, and the (already confirmed) divestment of wealth businesses by some banking institutions.
More than that, the increased focus on the quality and value of services being provided across the industries to fall under the Royal Commission’s remit will impact both administrators and their clients.
McMurtrie says that the selection process by funds for administrators was already highly competitive, with the comprehensiveness and rigour involved only increasing before the Royal Commission’s recommendations were released.
In addition to an independent super consultant managing the tender, for example, McMurtrie has also seen growing use of probity officers by funds to scrutinise the selection process.
From super funds, McMurtrie predicts “an increased focus on the quality and value of services being provided, and how they facilitate member retention and growth”.
Based on this, administrators will need to ensure that they are flexible, proactive with technology, and effective at improving the member experience to stay relevant in this changing landscape.