Despite its value, technology remains an area well outside the comfort zone of many superannuation trustees. With the rapid increase in tech innovation, it can be difficult for trustees to determine which of the myriad of tech capabilities available are most effective to deliver their fund’s business strategy.
Modern tech capabilities have become essential foundations for surviving and thriving in the digital age. They enable funds to drive costs down, ensure high quality of service and legislative compliance, and deliver the more sophisticated and engaging real‐time digital offerings that members increasingly demand.
Yet, the rapidly accelerating pace of change, the complexity of the technology itself, the unfamiliarity of the associated jargon and the seemingly infinite number of technology developments, leave most super trustees struggling to understand what kind of IT environment is needed for the optimal operation of their fund.
As a result, many trustees have shifted responsibility for key technology decision making, either to their in‐house IT team, software vendor or third-party administrator. But this does not absolve them from their duty to ensure their fund has the right technology in place. In order to meet their statutory obligation to act in members’ best interests, trustees must oversee the management of their fund’s IT environment with rigour.ii
To do this, they must first ensure they understand the vital role that technology plays in meeting the current and future business needs of their fund. Trustees have an obligation to educate themselves about the key trends shaping the super landscape and the tech capabilities needed to survive and thrive within the current ‘digital revolution’. They must develop a greater appreciation of the relationship between tech capabilities and key deliverables, such as big data and analytics and personalised member experiences, automation and cost efficiencies and seamless real‐time integration and augmented member offerings from third parties.
To help super trustees ensure their fund’s IT environment can meet the challenges and opportunities of the digital age, the following are seven key tech questions trustees should be asking their IT providers:
1. Strategy: Does the IT environment support and enable the fund’s core business?
Super trustees should begin by asking their IT providers whether the fund’s technology solutions are capable of supporting the current and future business needs of the fund.
Trustees need to know their IT provider has an architecture roadmap in place that is clearly aligned with the business strategy and growth ambitions of the fund. There must however, be budget allocated to deliver this roadmap, and to keep operating platforms and software up to date.
Trustees also need to be assured their IT provider is actively monitoring trends. An innovative IT provider is likely to be prototyping new technologies that better realise the fund’s business objectives. They will be across developments in artificial intelligence and robotics, and be looking at ways these tools could be applied to enhance product and service delivery, as well as fund administration.
In the pursuit of core business objectives such as data quality and cost efficiencies, trustees must ensure their fund’s IT environment can support straight‐through processing, automation and modern integration approaches.
Finally, trustees should ensure the fund has the necessary IT talent—either in‐house or outsourced—to achieve current and future business objectives.
2. Cyber security: What measures are in place to safeguard the security and privacy of member data?
Cyber security is one of the key challenges facing super funds in the digital age. The potential for cybercrimes, such as identify fraud, is increasing as more data is exchanged in real‐time with third-party providers. The likelihood of privacy breaches is also increasing as funds seek to provide member and adviser self‐service portals, as well as mine and link member data with data from external sources for the purposes of analytics. Despite the serious business risks posed, a recent KPMG report, entitled Cyber Security: the role of boards, found that more than two‐thirds (67 per cent) of boards have not undertaken cyber security (or information security) training in the last 12 months.
Trustees have a duty to keep abreast of cyber security challenges facing their fund and to ensure sufficient measures are in place. Regardless of whether the IT environment is in‐house or outsourced, trustees must know where and how their member data is being used and stored, and whether security policies and protections are frequently updated in order to stay ahead of the threats. Super funds must have the cyber forensic capabilities to detect fraudulent behaviours and prevent security or privacy breaches before they occur. In the event of a breach, there must be an appropriate incident response plan as well as capabilities to produce a documented chain of evidence to find out exactly what happened and who was responsible.
3. Scalability: Can the IT environment be scaled to meet the evolving business needs of the fund?
As more super funds come under increasing pressure to gain economies of scale through mergers and acquisitions, a key question trustees should ask their IT provider is whether the fund’s technology platform can accommodate scalability.
Whether growth is organic or acquired, trustees must ascertain whether their fund’s IT environment has the ability to add or remove capacity and processing power as needed. Can the technology platform handle large increases in transactional data volumes? Can it meet the growing data access and storage demands, associated with leveraging big data and analytics, in the pursuit of greater personalisation? As funds continue to encourage members to self‐service various aspects of administration—such as change of address, switching and transacting—can the technology platform handle substantial increases in the simultaneous use of the system?
4. Upgradability: What is being done to ensure the IT environment remains current in a cost-effective way?
In a rapidly evolving super landscape, trustees must anticipate changes in the market and ensure their fund’s technology meets the latest service standards and consumer demands. Importantly, they must ensure the IT environment can cope with ongoing legislative changes. They also need to know their IT provider is actively planning for the ATO roadmap of ‘message based’ reporting and ongoing enhancements to SuperStream.
Trustees should ask their IT providers whether the technology solution being employed is capable of regular updates to ensure currency of operating platforms and software, without the need for large and expensive system upgrades. Is the system being developed in a modular way that supports simple, frequent and low cost system maintenance? Is the solution being delivered in an agile way—such as via a ‘software as a service’ (SaaS) model—which sees a specialist vendor regularly enhance the system to ensure it keeps pace with the fund’s functionality requirements and compliance obligations? Given SaaS providers typically service more than one client, this approach enables trustees to benefit from and share the cost of enhancements and efficiencies achieved across the vendor’s entire client base. Whether managed in‐house, via a software vendor or a third-party provider, trustees must ensure their fund’s technology solution can be easily upgraded in support of business agility, speed to market, and compliance obligations.
5. Interoperability: Can the IT environment interact seamlessly with external systems?
In recent years, the traditional closed and proprietary approach to software development has been largely superseded by a more open and collaborative approach that supports business innovation. To tap into the many benefits of this approach, super trustees must ensure their IT provider employs a technology solution that supports open, standards‐based application programming interfaces (APIs) and service oriented architecture (SOA).
Broadly, this approach allows multiple pieces of software that may have different operating languages to speak to each other, without having to build specific links for every interaction. SOA allows business rules to be stored centrally which means the cost of managing change is reduced. It enables funds to quickly and easily add new offerings and modify existing offerings, without having to start from scratch, and fosters cost effective real‐time system connectivity between super funds and third party providers. It further enables funds to open up their API development environment and invite fintech developers to build new value‐added tools and functionality that seamlessly integrate with their underlying registry solution. This open approach to software development unlocks a wealth of expertise and innovation that would not otherwise be available to super funds.
6. Customer centricity: Does the IT environment put the customer front and centre?
The Australian super industry is shifting away from the traditional focus on product and the servicing of employers, towards member centricity. In an era where the customer is now king, the balance of power has shifted in favour of consumers, making it crucial for super funds to adopt a customer centric business approach.
Trustees should ask their IT provider whether their fund’s technology has been architected using human‐centred design (HCD), an approach to systems development that aims to make systems usable and useful by focusing on the requirements of the users. Put simply, does the fund have the technological capabilities to communicate and interact with individual members about their specific goals and circumstances, using everyday language? Does it enable funds to employ big data and analytics to personalise product and service offerings to individual needs? Can the system meet member expectations for more diverse and sophisticated products, investment options and asset classes? Can the solution cater for differing member preferences with respect to distribution channels—fund, D2C and advisor—and service delivery and communication channels – mobile, email, SMS, mail and phone? Does the system support the seamless third-party interactions necessary to augment member offerings with related products and services such as financial advice, life insurance and health insurance? As members demand greater control over their super, does the technology solution support real‐time self‐service capabilities?
7. Efficacy: Are tools in place to measure whether the IT environment is achieving business outcomes?
It is essential for trustees to evaluate the efficacy of their fund’s IT environment. Trustees must know whether their IT provider has the tools and processes in place to determine whether the fund’s technology systems are achieving business outcomes.
Firstly, there should be systems in place to measure the fund’s IT performance against its own business objectives. Where the IT provider is building and maintaining software components in‐house, trustees must ensure that appropriate due diligence is applied to the quality and cost effectiveness of this strategy, compared with procuring vendor supplied products where the costs are shared by multiple customers.
Legislative compliance management should also be scrutinised to ensure that ongoing compliance obligations are being met in a timely, accurate and cost-effective way.
Lastly, in a landscape where the fees and net returns of super funds continue to come under intense scrutiny, funds wishing to remain viable must have the ability to benchmark their performance against their competitors at low cost.
In order to measure and manage IT performance across all three areas, savvy IT providers are turning to modern unified technology solutions that employ workflow/Business Process Modelling (BPM) tools. These tools cost effectively map an organisation’s business processes and measure the actual outcomes against their service level agreements (SLAs) and compliance obligations, making it easier to compare performance with competitors. Trustees should be wary of IT providers that continue to rely on bespoke legacy systems given that performance and compliance management typically incurs hefty costs associated with system integration and duplicated systems and processes.
In a highly digital world, modern enabling technologies are the lifeblood of the new world order in super. The seven key tech questions above provide a framework for the types of conversations super trustees should be having with their IT providers to ensure their fund’s IT environment has the flexibility and agility to meet key deliverables, and ultimately, deliver their fund a distinct competitive edge.