6 December 2012

With Australia’s total pool of superannuation savings recently smashing through the $1.4 trillion mark, one of the more astonishing statistics that we consistently see reported is the proportion of Australians who have little or no understanding of how their retirement savings are being managed.

The most recent of these is an ING DIRECT Financial Wellbeing Report which confirmed that 67 per cent of baby boomers (those aged between 50 and 64) are ignorant of their superfund’s investment allocation.

With average super balances for males aged 65 rapidly approaching $200,000, what is driving this chronic lack of knowledge?  Why are so many Australians remaining wilfully ignorant of the details of one of their biggest and most important investments?

Sadly, the answer is that many Australians don’t really feel any kind of positive emotional connection with their superfund.  In fact many people feel a very real (and in some cases quite visceral) sense of cynicism and suspicion of anything related to the superannuation system.

So how can this deeply entrenched negativity be overcome?  How can we turn the tide and get Australians feeling positive about their retirement planning?

Interestingly, a template for success already exists – in the form of the Self Managed Super Fund (SMSF) sector.

A recent Russell Investments research paper indicated that SMSF trustees and non-SMSF trustees hold almost polar opposite views with regard to their confidence in the superannuation system, and that most SMSF trustees indicated that their fund’s performance had lived up to their expectations.

So if SMSF trustees are subject to the same constant government tinkering with the super rules as the rest of us, and if they’re suffering the same disappointing investment returns as the rest of us, why do they have such a high level of confidence and satisfaction when compared to people who don’t have an SMSF?

The answer is – emotional connection.  An SMSF trustee is more likely to have a far greater sense that the money in their fund is theirs. And because they enjoy direct responsibility for their money, they are far more likely to stay engaged and to try to learn from their investment mistakes.

So how can this level of engagement be encouraged in non-SMSF clients?

The key lies with access to information and an ability to have some real-time control over their savings.  The majority of SMSF trustees can easily rattle off a detailed list of most (if not all) of the investments in their fund, along with a comprehensive justification for why they invested in each one.  Ask yourself, can your clients do that?

Do they have round-the-clock access to detailed and up-to-date information about their investment portfolio?  Can they easily track their progress against contribution caps and take ownership ensuring they never breach them?  And most importantly, do they feel like they control the decision making process when it comes to their investments?

Technology provides us with tools that give us the ability to engage with superannuation clients in entirely new ways and to customise our approach to suit different client needs.  For instance, many people have regular access to a computer while they’re at work; however a lot of Australians spend their working day on the road, or in a non-office environment.

Smartphone access allows clients to monitor the details of their investment portfolio and process contributions and pension withdrawals from virtually anywhere.  Up-to-date performance reports on a per-holding basis are now available for clients to review while they’re on the move.  Providers should now be looking to pro-actively contact members with personalised messages about their portfolios, their value added services and market conditions.

Other developments such as the Australia Post digital mailbox will offer the ability for members to retain all their superannuation documentation and trading information in a real-time, secure location allowing access by planners and accountants to offer informed and relevant advice and support to their clients.

Web-based tools are becoming increasingly flexible, powerful and personalised. The way we learn to harness them to keep our clients informed and empowered will be critical to ensuring they become – and remain – engaged and therefore  ‘emotionally connected’ to their superfund.