The global financial crisis prompted superannuation funds to refine their member communications and engagement and, as Damon Taylor writes, the lessons learned are continuing to be applied.
Twelve months ago, most super fund executives were talking about building upon the member communications momentum that had been generated during the global financial crisis (GFC).
Of course, having achieved higher levels of member engagement, the challenge lies in ensuring that engagement doesn’t taper off.
According to Damian Hill, chief executive officer for REST, most funds have been communicating effectively enough to avoid such a fate.
“The key point here is that the engagement of members with their superannuation has stayed at a higher level,” he said.
“The GFC saw member engagement grow very rapidly and peak as people took an interest, and while it did drop back somewhat post-GFC, it was to much higher levels of engagement than we’d seen previously. And I think that’s what you’re observing in the marketplace generally.
“With that higher level of engagement, not only has there been a desire for super funds to keep communicating, there’s been a need as well.
“Members have been demanding funds to communicate more with them and they’ve been receiving more relevant information as a result.”
Alternatively, Chris Jansen, acting director of Wealth Management Products for AMP, said while communications had certainly increased recently, he wasn’t convinced it had been on the back of the GFC.
“We are, however, seeing very much more proactive communications, and if I use AMP as an example, we went to market a year or so ago with our Member Benefits Report to a number of our superannuation customers,” he said.
“We’ve had great success with that and are continuing it. But I think that’s just one example of the communications that organisations are now providing through websites, through printed communications, and through their financial planning arms.
Communications have become far more proactive than they were two or three years ago.”
Wayne Sullivan, Executive Manager of Marketing at HOSTPLUS, said that increased member engagement had been one of the few positives to have come out of the GFC.
“There’s no doubt that if there is a silver lining to a cloud like the GFC it is that fund members do start to pay more attention to their super and the communications they receive and see from their super funds,” he said.
“At HOSTPLUS, we have always placed a high priority on regular member and employer communications, so to an extent, we haven’t needed to markedly change our approach to the way we communicate.
“At an industry level, though I think we have seen change in the volume, and I have to say, quality of fund communications,” Sullivan added.
“And that’s a function of the ongoing maturity of our industry, an increase in the number of funds employing specialists in communications roles and leveraging enhancements in technology,” he said.
Indeed, it could prove fortuitous that member communications and member engagement has been maintained at higher levels if one considers the current state of the global economy.
The volatility seen in markets in recent years has concerned a number of investors, and according to Hill, it is not surprising that superannuants will have sought a degree of reassurance as well.
“There’s no doubt that over the last week or so, we’ve seen a very small increase in our call centre volumes,” he said. “But then it’s also dropped back as the market was going up and down like a yo-yo.
“That said, I don’t think any of the communications coming out now are necessarily a different message from those that were prepared for the global financial crisis,” Hill added. “It’s still about volatility, it’s still about long-term investing, staying the course, and so on.
“We put great effort last week into arming our call centre and field staff with more information about what was happening in the market, but what’s been particularly pleasing is that we’ve found ourselves better able to deal with this sort of peak than we might have been pre-GFC,” he said.
Similarly, Sullivan said super fund members’ greater levels of engagement had meant that most would have understood the market events of recent weeks, and more importantly, would have understood how they should be reacting.
“If members became more engaged with super during 2008 and 2009, I’m not certain that new level of engagement has completely disappeared in the interim,” he said. “So, I think members will have had a greater understanding of what has been happening over recent weeks.
“One lesson the GFC delivered to us as a fund was that early, effective communication goes a long way in assisting members to place the increased volatility of markets into some context in terms of their long-term retirement savings,” Sullivan said.
“We did take the opportunity to communicate with our membership, via email, in the days following the initial heightened market swings we saw in early August, and we provided specific information on our website to help members make some sense of it in terms of their super.
“It is, after all, only natural that members and their employers will be concerned, will be looking for reassurance and, in many cases, advice.”
Yet while it is clear that members are far more willing to receive the messages that super funds have long wanted to deliver, the acknowledged challenge is ensuring those messages are at once compliant and easily understood, able to be delivered efficiently, and yet also personalised.
On the topic of balancing personalisation and practicality, Hill said there was no escaping the need for compromise.
“With any communications message — and it doesn’t need to be related to superannuation — the more relevant and personal you make it to the end audience, then the more likely it is to be accepted,” he said. “And that holds true whether it be in a classroom, in a mail out or by any other means of conveying information.
“It then becomes about how practical it is, and you do need to make compromises and put members into various cohorts,” Hill continued.
“But our experience has been that the more effort we’ve put into segmenting our membership and then tailoring communications to that membership, the higher the readership and the higher the response rates have been to our calls to action.
“There are certainly pay-offs for personalising communications, but when you’re dealing with a significant number of members, you’re unlikely to be able to get it down to a member by member basis — you’re going to have to make some compromises,” Hill said.
For Jansen, personalisation comes down to the medium under which funds provide information to their members.
“Access via calculators, websites, that kind of information can be personalised relatively easily because the customer can put the information in themselves,” he said.
“Or in some cases, the information can be pulled from the underlying product systems with which they’re interacting.
“There will always be some documents in which personalisation may not be economical,” Jansen continued. “But there’s no doubt that taking a personalised approach as much as possible is likely to engage each customer far more.
“Customer engagement is a huge component of successful superannuation; it’s about making the information available when and how they want it, and the best way to do that is to actually listen to your customer,” he said.
Talking about the balancing act between making member communications both compliant and understandable, Sullivan said the guiding light had to be member perception.
“As communicators, we want to deliver messages that are easy to understand, to the point, and clear,” he said. “And frankly, most compliance people I’ve worked with would fundamentally share those ideals.
“Where the balancing act comes in, is around ensuring that information is complete and not misleading. The challenge is to ensure the really important messages stand out among the detail that needs to support them.
“It is possible to talk to someone in simple, easily understood terms without being inaccurate or misleading — you just need to think of the member or employer first, and speak in language they would use and understand.”
The other balancing act, according to Hill, is getting the information out in a timely manner.
“With this higher degree of engagement, and with a greater interconnectedness of people, actually getting the information out there quite quickly is important as well,” he said.
“We’ve worked hard to make sure that our communications team and our compliance and investment teams have very good operating methods amongst them.
“In fact, we’ve invested more resources, particularly in our investment team, to make sure they can get the information out there quickly, and the other teams know to respond,” Hill added.
“In effect, we try to look at this from a member’s perspective and yes, it needs to be compliant, but it’s also got to fit in with the demand of members.
“You can’t put anything out that’s not compliant, but you can’t also wait five days to finesse the words within an inch of their life,” he said.
However, if getting the important messages out to members in a timely manner is an important factor in member communications, so too is backing those messages with advice. Enter, the relatively new development of intra-fund (or single-issue) advice.
The ideal scenario, presumably, is that member communications in the form of a mail out or website visit provokes a question and prompts that member to seek intra-fund advice. Of course, the reality is that there have been a number of funds that have chosen not to add intra-fund to their service arsenal, and for Hill that is not surprising.
“We provide single-issue advice, but I wouldn’t necessarily say that it qualifies as intra-fund advice according to the regulations,” he said. “We do it under the previous rules, where there’s the ‘know your client’ rule, and we give them a needs analysis as part of that.”
“One of the issues has been that we were at the forefront of this development when we launched the pilot of this program back in 2004,” Hill continued.
“And at that point, it was a market in which there were no solutions to this area of advice — you had traditional financial planning advice as part of the wider financial planning industry, but it was largely focused on those people who were close to retirement, or very high-net-worth individuals. It’s not like there was always this simple advice solution.”
Hill comments that at that time, intra-fund or single-issue advice simply didn’t exist and that in many respects, it was a market failure on the part of the superannuation industry.
“I think what has happened over the last six or seven years is that more and more players have been dipping their toes in the water,” he said.
“They’re still finding that it’s a challenge to provide single-issue advice on a cost-effective basis, particularly in terms of members’ expectations of the reasonable cost of advice versus what they are, but there’s no doubt that they’re looking at it very seriously.
“At REST, we continue to work hard at this as well and we’ve seen issued, I think, over 80,000 pieces of advice to our members over the years,” Hill said.
Speaking to the flow of member communications through to advice specifically, Jansen said the most important thing was giving members the information they were seeking in their preferred form.
“It’s a really interesting question, because obviously all our customers have access to financial planners,” he said.
“We certainly provide that access, and depending on the customers needs, sometimes they’ll seek a full advice model from a financial planner, sometimes they’ll seek general information from our call centres, and sometimes they won’t seek any information at all.
“Nevertheless, we’ve got to provide the mediums so that they have access to all of those things,” Jansen continued.
“It,s about finding a medium which is appropriate to the customer at that particular time, and one which provides them with the necessary information, be that via a website, via our financial planners, or via a general mail out.”
Taking the members’ point of view, Sullivan said people often didn’t realise they were even asking for advice when they contacted their particular super fund.
“‘What investment option would be best for me?’ seems like a pretty straightforward question to a lot of people, and one they would expect their fund could answer for them,” he said.
“So it’s important for funds to firstly educate members and encourage them to ask questions. Clearly, funds have a responsibility to at least provide them with the facts around those questions. And there is an opportunity for funds to provide an answer because generally members would expect that, even if it is only confirmation of the member’s own thoughts.”
However, the elephant in the room when it comes to member communications is MySuper.
As a superannuation option that caters to Australians who are not engaged with their super, it almost seems to fly in the face of the very thing that member communications is trying to achieve.
According to Sullivan, however, any communications impacts were likely to be minor.
“HOSTPLUS’ current default option already largely mirrors the currently proposed MySuper architecture, so we don’t envisage the need to change our communication a great deal to comply,” he said.
“We also believe that all members are potentially engage-able, and while we may alter our methods and channels of communication with our MySuper members, we’ll continue to treat those members as both valued and worthy of knowing of our extensive range of options and value-adding benefits.”
Furthermore, Sullivan said that MySuper could even prove the trigger for increased member engagement.
“It does sound a little defeatist to base a system around a product that almost encourages members to be disengaged or to avoid making a decision because they don’t know how,” he said.
“The reality is that that’s an important group that is sometimes forgotten.
“MySuper could potentially have the opposite effect,”
Sullivan pointed out.
“It might be the trigger for some people to actually
exercise their consumer power and not settle for the ‘entry level’ product or service.”
“Trustees will still have a fiduciary obligation to help members maximise their retirement outcome, and to that extent, it will still be valid, perhaps more than before, to educate members about the best ways to do that.”
Hill said there had been a lot of talk about the need to increase transparency and disclosure within MySuper, saying it would be interesting to watch how such a change affected member communications.
“Broadly speaking, I think increasing the extent of disclosure is a good thing,” he said. “But I think the challenge will be to make sure that we not only add to the disclosure regime, but that we actually look at whether we should be removing some things as well.
“Things like information about trustees’ insurance strategy, greater descriptions about risk — they could be useful,” Hill said.
“And I would hope that MySuper puts more of a focus on what trustees are trying to deliver through each of their portfolios, rather than how they’ve gone against everyone else.
“Most of us have a CPI of +3 per cent or +4 per cent
target within our portfolios, but how much do we report against that target versus what the median fund has done?”
According to Hill, with transparency and disclosure, as with member communications, the challenge is giving members the right information in the right fashion.
“The challenge is getting that balance right,” he said. “How much disclosure versus how easily that’s understood.
“Annual reports are a good example. With the annual reports for some corporates, the reality is that you get a fudge factor and most investors have now opted out of that sort of full disclosure. They are just not interested.
“Superannuation disclosure can get much greater, but are we going to achieve the right balance of getting understandable and simple messages across rather than just the fudge factor?” Hill asked.
So what next? With volatility rife within financial markets, uncertainty persists, but according to Hill, funds should be meeting that uncertainty with information.
“We can’t say with certainty what’s going to happen but, regardless, we’re in the business of investing peoples’
retirement savings so we have to make a call and have a strategy,” he said. “We have to explain that strategy and explain why we’re holding course.
“Has the world actually changed that much in the last few weeks compared to what it was before?” he asked. “I’m not sure. The markets are certainly more skittish and volatile than they have been, but I’m not sure the world really has changed that much.
“For most members, their long-term time horizon in the last two weeks has only reduced by exactly that — two weeks over 30 or 40 years — and that’s what they need to be reminded of,” Hill said.
According to Sullivan, the global financial crisis has prepared both funds and members well for current market challenges.
“So we will continue to educate members about the long-term nature of super and the fact that market volatility is a part of the journey,” he said.
“That’s a message we were delivering before the GFC, when returns were consistently high, and it’s a message we have to continued to deliver.
“As a whole, the industry has come a long way in terms of educating members about super, and though we will continue to see great initiatives to engage and educate, there is still a long way to go,” he said.
Sullivan said at HOSTPLUS, the focus was simple.
“We will continue to look for new, innovative, and effective ways to reach our members and employers, and build the connection and trust they have in our brand and ethos, so they will more readily want to engage with us about their super.”