In recent weeks there has been discussion in the Australian industry about Investment Trends’ latest report stating that an increasing number of Australians are turning to Superannuation funds for advice.
The report builds on a number of recent others, including from ASFA (Consumer attitudes to superannuation and super policy issues, Nov 2011), stating that members are demanding more educational support and advice from their funds.
So why is this? According to the report, the main reason advice provided by super funds is so attractive is its low cost – Australians are not willing to pay heavily for financial advice.
While price is obviously important, we think there is likely to be a range of factors driving the average person to their superannuation provider for financial advice:
1) For most people, apart from their home, super is their largest investment, so it would seem only natural to seek advice from the provider that is investing such a significant amount of money on their behalf.
2) An aging population means the pool of people interested in their super has increased and we know from the AIST/Russell Investments Super Engagement Index (2011) that engagement in superannuation increases proportionally with age.
3) If funds provide the information, members will come; i.e. super funds have been reacting to demand and have started offering and promoting more educational and analytical information – especially on their websites.
What does this mean for funds? If Investment Trends is right and a low cost base is what Australians are looking for, then this will mean cost is a major competitive factor in this space.
As part of an integrated strategy to attract and retain members, super funds need to look at containing the cost of advice WITHOUT compromising the quality of service. Part of the solution will be offering and managing scale advice for members.
Funds need to ensure they are facilitating the quick, efficient and accurate provision of advice and deliver it with the right service level for the advice sought.
Advice delivery methods will depend on the complexity of the advice required; the right level of service could be delivered online by user driven calculators or may require escalation to human advisors. If a fund plans to capitalise on this trend, then it may be time to look at operational processes, technology set up and allocation of human resources to ensure the business can provide quality service members expect, at a price they are willing to pay.
How will your business offer quality advice at competitive prices?