Despite impressive campaigns and solid advances, member communication remains a work in progress for most superannuation funds, writes Damon Taylor.
In the face of industry progression, legislative change and even a global financial crisis, the one thing assured by the superannuation guarantee is the relevance of superannuation and retirement savings to all Australians.
Yet despite that fact, low levels of understanding and even lower levels of fund member engagement remain the industry’s key challenge and one best met, according to Peter Robertson, chief executive officer of Maritime Super, through the delivery of targeted and relevant member communications.
“Delivering targeted and relevant communications through a member’s preferred channel is vital if a fund is to help them understand and make the most of their investments,” he said.
“The super industry has made a lot of progress in utilising multiple channels, considering attitude, literacy and interest levels.
“The short-form PDS [Product Disclosure Statement], for example, is a great initiative,” Robertson continued. “But there is still a struggle between lengthy legal disclosure and succinctly informing members about their superannuation’s key benefits.
“There needs to be a major change if we are to see real improvement.”
Russell Mason, Mercer worldwide partner and national business leader for industry/multi-employer superannuation, said the super industry had recognised the key challenge that lay in member communications and that all funds had demonstrated an enthusiasm to respond.
“The industry is constantly looking at new ways to communicate and it is doing so with a much greater level of sophistication,” he said. “Whether it is through targeted mail outs or segmenting their membership, funds have realised that the messages delivered to a 55-year-old have to be very different to those delivered to a 25-year-old.
“Clearly, at 55 you’re thinking about retirement whereas a young man or woman of 25 will probably be saving for a house or planning for an overseas trip,” Mason continued. “The communications focus is fundamentally different.”
Mason added that he had also seen real attempts at the use of plain English within super funds’ member communications.
“In the past, lawyers ruled the wording of member communications,” he said. “But while there’s still a need for legislative compliance, there is now an equal emphasis on encouraging understanding.
“The industry is still hampered with respect to what it can and cannot do [under] current legislation, but across the board there is a real effort towards plainer English and targeted communications.”
In similar fashion, Teifi Whatley, general manager — marketing and communications for SunSuper, said the super industry had made a lot of progress and that, on the whole, it had navigated the financial crisis well.
“Obviously the results reported through the financial crisis were not often happy reading, but it gave the industry an opportunity to really step up its member communication efforts,” she said.
“Good communications is about relevance and that fact has become a lot more important, particularly through the global financial crisis.
“Five years ago funds reported back to their members once or maybe twice a year,” Whatley continued. “But it’s now happening a lot more often and in a lot of different ways and, for the super industry, that is certainly a step in the right direction.”
Upon reflection, the global financial crisis has undoubtedly presented Australian super funds with a significant communications challenge. Yet the silver lining to that challenge has been the yardstick it provided.
Funds have been able to measure the success of their member communication efforts against member retention and allocation switching, but according to Mason, there may be other, more accurate gauges.
“Member retention is still vulnerable to face-to-face marketing and even the self-managed super fund sector,” he said. “So fund executives are also looking at the number of enquiries they’re receiving, how often account balances are being checked and so on.”
Of course, it is arguable that communication failure within this financial crisis was most readily demonstrated by the crystallisation of members’ investment losses, but Mason said in his experience such poor decisions had not been common.
“Realistically, people had to be careful of what they said to members through the financial crisis,” Mason said. “It was a fine line between providing good information and giving financial advice that funds were not licensed to give.
“Surprisingly, we didn’t see a lot of member movement, either between funds or between investment options, and the reasons for that are what funds need to ensure they understand.”
Pauline Vamos, chief executive officer of the Association of Superannuation Funds of Australia (ASFA), said the global financial crisis’ switching yardstick had to be balanced against those fund members who had been deemed in and those who hadn’t leveraged choice.
“Beyond that, very early in the global financial crisis, ASFA pushed ASIC [Australian Securities and Investments Commission] to provide temporary relief to superannuation trustees in providing guidance to their members,” she said.
“It was a move prompted by a marked spike in call centre enquiries, but we firmly believe that this relief allowed far better member communications.
“Guidance could be delivered effectively, and I think the message of crystallised losses was received loud and clear.”
For his part, Robertson pointed out that member retention could have been attributable to communications success or member apathy depending on the member demographic.
“And the same can be said for switching,” he said. “It is arguable that members who were informed enough to understand what was happening with their superannuation and investments and sought advice may have been more or less inclined to switch for a variety of reasons.
“But it can be equally argued that switching occurred because members were not well enough informed about the potential consequences of trying to time the market,” continued Robertson.
“In the end, it really comes down to the member demographic, the education, communications and advice available and accessed by members and the motivation of the member for switching or remaining with their existing strategy.
“Each fund is likely to have a different experience for a wide variety of reasons and is likely to have subgroups of members that could fall into either of the above categories.”
Asked whether super funds had altered the focus of their member communications as a result of changing financial crisis circumstances or the crystallisation of losses, Robertson pointed out that short-term financial crisis messages were just as relevant over the longer term.
“Communications were definitely refined, but I also think this is half the problem,” he said. “The long-term message we all talked about is something that we need to continue with when markets recover.
“If members get this message and understand it, there should be less of a need for us to do all the ‘reassuring’ we had to do in response to the crisis,” Robertson continued. “Members won’t like falling account balances, but they’ll see it as an inevitable part of any long-term cycle.
“And long term, they’re still in the right place to set themselves up for a comfortable retirement.”
In line with Vamos’ comments on ASIC’s temporary ‘limited guidance’ relief is the Federal Government’s recent decision to allow superannuation intra-fund advice. On the surface it appears a decision of particular significance to member communications, but according to Whatley, the change it has prompted has been minimal.
“Outwardly, I’m not sure we’ve seen a huge amount of impact,” she said. “Some funds are perhaps providing advice where they didn’t previously, but SunSuper has provided its members with advice through various financial planning channels for a number of years now.
“So for us, there isn’t likely to be a lot of change.”
Whatley said in terms of opportunity, the provision of intra-fund advice allowed super funds to deliver more personalised advice through a wider variety of channels than the traditional face-to-face and telephone approaches.
“Funds can now find ways to deliver the right level of advice at the right times and through the right channels,” she said.
“Obviously, funds and their trustees need to be careful, but a decision like this increases the scope with which advice can be delivered.”
Mason said the availability of intra-fund advice certainly hadn’t had the impact it could have.
“A lot of funds simply aren’t going down that route,” he said. “And that may be because the legislative requirements are too onerous or because they are happy with their current outsourcing arrangements.
“But like most of these changes, it’s something that will open up as people come to grips with it,” Mason continued. “It will be a slow start because it requires much more than simply giving advice.
“Certification, fact finding, resourcing — it all takes time.”
For Vamos, the main benefit of ‘limited guidance’ relief and the provision of intra-fund advice has been clarity.
“The clarification of the line between factual information and personal information, general advice and personal advice has been a huge step forward,” she said. “It’s enabled a fuller understanding for our industry’s members and we cannot underestimate the importance of that clarification.”
But Vamos was quick to point out that Australia’s super industry could go further towards clarification for trustee confidence as well.
“There still isn’t enough ability within the industry’s legislative framework to join information, advice and disclosure,” she said. “Different regimes mean there isn’t enough understanding of the lines between disclosure and advice, for example.
“And that’s why we continue to have people who don’t even know they can get advice,” Vamos continued. “That’s knowledge that has to get across and it has to be delivered easily and electronically.”
The price of poor communication
Yet moving past the global financial crisis, moving past market volatility, member uncertainty and a range of industry developments, recent research conducted by a super monitoring company, monitormysuper, has shown that the consequences of poor communication can be severe.
Speaking to that research, and more specifically to the communications delivered by a financial adviser, Peter Morrison Dowd, chief executive of monitormysuper, said most member movement between funds was due to a lack of guidance and communication.
So what then are the traps and pitfalls that super funds should be avoiding?
Vamos said the traps funds had been falling into, and those most funds were not finding their way out of, were all related to a lack of focus on the individual.
“As an industry, we have to get better at providing service on an individual basis,” she said. “We want the integration between financial planning, information and education to be a natural part of super.
“That’s why financial advisers are so important,” Vamos continued. “They have the relationships with fund members and are best placed to facilitate that sort of integration.
“Of course, most people don’t have an adviser and for them it’s a relationship that has to be taken care of by the trustee.”
Similarly, Mason said the trap he had seen funds fall into, and one all industry executives could fall into quite easily, lay in making member communications too generic.
“If that’s the case, members simply don’t relate,” he said. “Other mistakes could be in the length and complexity of communications.
“And avoiding that is about meeting with your lawyers and ensuring your communication is something that’s both compliant and easily understandable,” Mason added. “It’s a trap we’re forced into by the industry’s legislation to some extent.
“But I can see funds’ communication efforts getting braver now and still following the letter of the law.”
Keeping it simple
Placing a slightly different emphasis on the importance of balanced member communications, Whatley said she was a firm believer in delivering a single position and a single overarching message and not straying from that.
“Communications can be overcomplicated,” she said. “And there is also such a thing as over-communication if a fund isn’t communicating with its members about the right things.
“The other mistake to be made is not listening to what it is your members are saying,” Whatley continued.
“At SunSuper, we do a lot of research into particular concepts, particularly online campaigns, and we do a great deal of user-testing to support that.
“We feel it helps to simplify our message and make certain that we aren’t falling into the trap of using jargon and switching people off.”
According to Robertson, if there is any area in which funds are lagging behind with their member communications and education, it is in providing their members with projections and a realistic view of what their retirement savings will amount to.
“In recent years funds have made fantastic progress with communications, education and marketing,” he said.
“The bar has been raised, with many funds now producing highly professional, engaging pieces that measurably contribute to the financial wellbeing of members and the fund’s bottom line.
“However, members want to see what they will have at the end of the day,” Robertson continued. “They want to understand what difference advice or certain actions will make to their balance over time.
“Projections should be regarded as a vital and engaging component, but they are one that is often missing from the education arsenal.”
Taking stock and looking back at super communication innovations, technology is the constant underlying theme.
With rapid development of web, text and multimedia messaging, e-mail and so on, it has often been innovation’s driving force, and if Whatley’s experience is any indication, at least some funds are conscious that technology must be the enabler rather than the end solution.
“Technology has become more and more important in member communications,” she said. “But I think it is also fair to say that technology is still not being used all that efficiently by many funds.
“There’s still too much paper and still too many manual processes, but the advances that we are seeing are making the delivery of our message much easier and much more cost effective,” Whatley continued. “From our point of view, technology is the enabler.”
Whatley said as long as super funds have all channels of communication open and operating, the member experience would have to be enhanced.
“But if all you’re doing is spamming your members with e-mails and SMSs, it’s a relationship that’s going to sour,” Whatley said. “Technology is absolutely the enabler and not the solution.”
Also seeing technology as the means rather than the end, Robertson said technology allowed funds to gain maximum value from their communication efforts.
“Technology is an enabler,” he said. “It allows us to squeeze value and communicate more cost effectively and more frequently with more tailored and personalised messages.
“However, it cannot be technology for technology’s sake,” Robertson added. “The end result is you have a message and you want your members to get it and react in the way you intended.
“If technology can improve this, well let’s use it.”
Robertson urged funds and their executives not to forget that a good one-on-one or face-to-face conversation was almost always the best way to communicate.
“It’s really about making sure you use the best tool for the different messages you have.”
At the end of the day, the greatest challenge in member communications seems to lie in engaging members, enticing them to be interested in what funds are communicating and inspiring them to care about their retirement savings in general and their superannuation in particular.
And, according to Whatley, it is a challenge likely to remain difficult.
“A compulsory superannuation system will always lend itself to some member apathy,” she said. “But funds have to understand and deal with that.
“Our responsibility is to engage them at whatever level is possible,” Whatley continued. “And that means ensuring that the right default investment options are in place and that some sort of communication continues.
“Because at some point, that trigger for their engagement might be there, and we want them to know what to do and where to start. At the end of the day, we’re still looking to provide them with the best possible retirement income.”
Contrasting superannuation’s less engaged members with those currently approaching retirement, Robertson pointed out that there are indeed members out there who are anything but apathetic.
“Older members and those with higher balances are far from apathetic,” he said.
“However, younger members, especially [members of generation X and Y], like instant gratification and, unfortunately, there is nothing instant about super, especially when you consider they can’t touch their super until they’ve retired.
“Unless members take advantage of the Internet, call centre or financial planning services, they may only hear about their account balance once or twice a year when member statements are mailed,” Robertson continued.
“So to some extent the system itself encourages apathy with the default option — members don’t have to decide which fund or even how their money is invested if they don’t want to.”
Though admitting that a degree of low member engagement was somewhat inevitable, Vamos said she was confident that most Australians understood that they would not be happy living on the pension during their retirement.
“It’s not about becoming an expert either,” she said. “It’s about our members understanding that they have to take responsibility for their income during retirement and knowing what it is they have to do to achieve that.”
Furthermore, Vamos said the measure of funds’ communication success would be simple.
“It will be measured by the number of people that top up their super accounts, the number of people consolidating accounts, the number of enquiries on optional insurance, access to the co-contributions scheme and so on,” Vamos said. “It will be measured by what people are doing.”
Looking to where super funds’ communications focus need to be into the future, Robertson said funds need to be proactive rather than reactive.
“There’s only a finite amount of communications we can do,” he said. “Funds are good at providing general information to all members, but to be most effective it’s important that we’re proactive rather than reactive.
“This is where value-based and needs-based segmentation is most helpful,” Robertson continued.
“Value based concentrates on those members who show the greatest lifetime value, and they can be uncovered quite simply through analysis of attributes that are readily available in every super fund database.
“These members are generally more engaged and, as they are looking for support, communicating with this group often means greatest return on investment.”
Robertson added that a fund’s needs-based group could be developed by communicating with members when they have a ‘moment of truth’.
“Marriage, illness, redundancy and birthdays are all triggers and technology can enable funds to proactively communicate relevant and timely information when it’s needed most,” he said.
“Communications success will always be measured campaign by campaign.
“But real success looks like satisfied, loyal members who are advocates of your fund, who understand their benefits and who will retire with an adequate income, and that takes a team effort.”