Surviving in an evolving administration climate

Superannuation and administration have always had a symbiotic relationship. After all, you can’t have one without the other.

That’s beginning to change.

Super funds are starting to flex their muscles and either shop around administrators or even go at it alone.

Administrators need to up their game to meet this. While technology helps, at the heart of the issue is the need to provide member-centric solutions that can cater to super fund members’ needs.

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If super funds are needing to provide tailored solutions to retain members in a crowded market, it makes sense that administrators would need to do the same to appeal to the funds.

Moving markets

The last few years have been ones of change for administration providers. Superannuation funds have shown an increased tendency to chop and change who they offer their mandates to.

Link, who along with Mercer is one of the biggest administration providers in Australia, has already lost its administration mandate for CareSuper this year, for example, which represented about one per cent of its proforma revenue.

Last year alone, EIDD, Kinetic Super, Tasplan and TWU Super all changed administrator.

And the administrators’ bottom lines are being hit by these changes; in November last year, Link forecast flat revenue for the next financial year from its admin business.

Mercer’s head of superannuation (product and platform strategy), Darren Stevens, puts this down to changing demands from superannuation funds of their administrators.

“The increased regulatory pressure, results of the Productivity Commission report and the increasingly retail behaviour of the member base is pushing super funds to have a much clearer and differentiated proposition to their target customers,” Stevens says.

“Activity is definitely on the increase in this area with many of the larger superannuation funds looking to ensure their administration partners are best placed to support their growth aspirations and assist them in delivering their unique value proposition to the market.

“It is not just about price these days, they are looking for flexible partners who are continuing to invest in their infrastructure and solutions to support them.”

Tailored offerings

Superannuation funds are needing to work harder than ever to appeal to members.

With loyalty to funds dropping and the baby boomers, and the immense amount of super wealth they hold, retiring, it’s more important than ever for funds to work out how to make their members commit.

The obvious way to do this is through engagement.

Walking through cities these days, you see hip stores for super funds scattered around. AustralianSuper has lounges in Melbourne where they encourage members to come hang out and work, while UniSuper is opening shop fronts across uni campuses.

Part of engaging members is, unsurprisingly, through tailoring products to suit their individual needs. And super funds are spreading the pressure they feel to do so to their administrators too.

“Superannuation is no longer a ‘one size fits all’ service,” Stevens says.

“Member engagement is not a new phenomenon but the work in this space is accelerating.

“Super funds expect their administrators to provide either real time access to their data or be supported with sophisticated tools and analytics to allow them to communicate one-on-one with their members.

“As administrators, it’s important that we provide funds with a deeper understanding of their members, their needs and how they prefer to be serviced.”

Super funds are voting with their feet in their commitment to providing tailored member solutions too. CareSuper cited Mercer’s integrated technology solutions as a key reason why it swapped to the administrator earlier this year, but it wasn’t just the tech itself. Rather, it was the fact that it was “member-centric” in its focus.

Stevens says the trick for administrators seeking to provide tailored services is to understand the breakdown of funds’ admin needs.

“The trick is to understand what are the components of an administration service that need to be tailored to allow super funds to deliver their specific value proposition to their members and what are ‘commodity’ services that all super funds must do, and do efficiently and simply.”

The age of technology

As with most industries at the moment, technological advances are changing how administration works.

To start, it’s leading to greater automation.

According to wealth management software company IRESS’ managing director of superannuation, Jeff Hall, both employers and other players within the systems are heading down the path of automation.

This directly benefits clients, as “the lack of human horsepower needed” and the decrease in manual input leads to savings as both time and mistakes are minimised.

IRESS has seen over 90 per cent of superannuation contributions moving through its systems become automated.

Investment managers, insurers and brokers – all of whom administrators must work with – are also becoming more automated, which helps improve the services administrators provide.

“It’s faster and cheaper and we have a range of players in the value stream who are open to working together to get tasks done automatically,” Hall says.

According to Stevens, technology could also help administrators meet the need for tailored offerings outlined above.

“Clients’ expectations are being set by their service experience in all aspects of their daily life,” Stevens says, most of which are heavily influenced by technology.

“From the likes of Google to online banking, online retail to Netflix. The recent surge in use of AI-based chatbots and the likes of Amazon Echo, Google Home and Apple HomePod are changing the way consumers are interacting with their service providers.

“Consumers have preferences around how they interact. Some like to talk to a human (phone, face-to-face or Skype/video conferencing), some are quite happy dealing online and through chatbots, while others prefer a mixture of depending on the circumstances and complexity of what they are doing.

“As such, superannuation administrators will need to ensure their solutions can cater for these variations in how they intelligently service customers.”

But just as technology can help improve service offerings from administrators, it also means that client expectations are higher.

To meet this, Stevens says that investment in technology is needed.

“Administrators have needed to invest to ensure they have a software ecosystem that is open, capable of sharing and receiving data,” he says.

“They need to be real time, allowing 24/7 access and they need to be based around modern architecture to facilitate inter-connectability with the likes of fintechs and to best utilise new technologies such as the chatbots and voice-controlled devices.”

Open integration capabilities are also key here.

“There are new disruptor funds in the market that are looking for an administrator to support them but they’re looking for that administrator to support them with a range of open integration APIs that allows ... the super fund to have control over and differentiate their brand by enabling them to build their own digital interface with the customers, build their own social media presence and the like,” Hall says.

“They’re also looking for that administrator to open up their services to other providers, be that a non-super wrap style investment service, and they want that integration to happen technically, not through paper.”

Administrators who want to be taken seriously need to invest in providing these options.

At the end of the day though, Australian Catholic Super’s (ACS’s) head of marketing and business development, Cameron Wood, says that people still matter more than technology.

“Technology comes and goes, and it’s coming and going faster these days, so the people really are the key.”

He says that in ACS’s decision to self-administrate, the biggest challenge was not actually finding the technology. Rather, it was finding people who fully understood it and were trained to optimise it.

Fintechs taking to the field

A by-product of technological advancement is the advent of fintech and analytics providers. And they are making a play in the administration market, offering services that administrators traditionally have.

As Hall observes, this is naturally leading to increased competition.

To respond, administrators need to better open up their services. Fintech providers are entering the market not as administrators but rather to provide parts of the administration process, Hall says, and it’s important that the former are open to integrating with tech players.

Again, open integration is needed to capitalise on integration potential.

“Fintechs rely heavily on being able to access data and integrate in with the administrators’ systems to provide a more seamless experience for super fund members,” Stevens says.

As such, moving information between systems needs to be smooth and as automatic as possible. 

“It is not so easy for these fintechs to bolt into a super funds proposition if the solution requires information to be extracted, something done with it and then the resultant put back into the record-keeping system,” Stevens says.

“If the fintechs are not aware of how the administrators’ processes are structured it is very easy to skip necessary steps or require significant double coding of super fund rules and validations that can soon become out of step as the endless regulatory and other changes are made to the administration environment.

“The key is for the fintechs and the administrators to work closely together to create a more holistic seamless user journey.”

Can we do it ourselves?

Considering the demands to tailor services to members plus the potential offered by technology, it’s little wonder that some super funds are asking if they need administrators at all.

Sunsuper is one of the largest funds to make the leap so far, with small and mid-size funds also deciding to have a go of self-administration.

ACS was one of the first to venture into self-administration, and Wood says they have absolutely no regrets about the decision, citing the increased control over its own processes as a key benefit for the fund.

“Like anything in a business, when you give away control of a service, that lack of control ... is a risk,” he says.

The resulting agility and control has allowed ACS to innovate quickly, improve member experiences and preserve data integrity, Wood says.

And the proof is in the pudding – the fund puts its member satisfaction ratings at over 90 per cent, while its data integrity is 98 per cent compared to an industry average of 90.9.

The fund had a new website built and implemented in just three and a half months, for example, and restructured its whole LifetimeOne investment option in nine months to market.

Wood believes such innovation at such a fast pace wouldn’t have been possible had they been reliant on an external administrator to roll it out.

This is in stark contrast to ACS’s days with an outsourced administrator, when it often found itself being slowed down as it had to wait for the provider to agree to the project or sit in a queue of other clients.

“At the time [of deciding to self-administrate] the fund had aspirations for things it wanted to do ... and it’s a fact that when you’re a mid-sized fund and you’re with an outsourced provider, you’re not first in their list of priorities,” Wood says.

“We [now] have a greater opportunity to bring new ideas to life rather than waiting for outsourced providers to get to us on a list of their deliverables.”

He also says it has helped ACS better shape its services and products to suit member needs.

The fund can now research members and insights with more ease, allowing it to respond to the members’ needs rather than the outsourced provider’s needs.

“If we look at big outsourced providers who administers so many funds, you have to at the end of the day become more vanilla in your offering because you’re looking after so many members across many industries,” Wood says.

“At the end of the day, you’ve got to ensure the products and programs and services you pursue meet members’ best interests. [Self-administration] gives you the capability to keep customising, keep running the lens over members’ needs, rather than what is possibly the access provider’s needs or their other clients’ priorities.”

He points to ACS’s member base’s strong prevalence of teachers as proof of this; not all offerings would suit them, which would be difficult for large administrators to take into account in their services when they are also having to cater on a macro level to so many professions across their clients.

By self-administering, ACS is able to offer more customised and specialised advice to that demographic itself.