Rolling out the digital carpet

Video may have killed the radio star, but technology will only serve to strengthen the superannuation industry.

The industry has now largely completed the technological shift it started about five years ago, with all funds on the road to evolving their digital presence.

And while, according to IRESS managing director, superannuation, Jeff Hall, there’s been a “real mix in the adoption of technology by super funds”, there are some changes and challenges that apply across the board.

What has the technological shift involved?

Ian Webster, of Investment Trends’ advisory board, points to change in the front and middle office as the main outcomes of funds’ shifts to technology.

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This has seen the front office, meaning member-facing aspects such as the website, “updated and modernised”, with the middle office, including marketing and processing super payments, becoming increasingly tech-reliant.

In line with this, Hall says that in the first phase of a fund’s digital shift, they automate back-end processing to drive administration efficiency. In the second phase, they move more transactions online so that the member can do more digitally.

“It’s the second phase that’s most exciting and there’s certainly a number of funds looking to go beyond a transactional level of engagement with members,” he says.

Tailored messaging and push notifications to members, dashboards that drive engagement, functionality to allow members to set and track superannuation goals, and the ability to receive automated online advice exemplify what funds are implementing in this second phase.

Now that this transition to tech has occurred, the next step is making the most of it.

“Most funds have undergone that journey, with the Stronger Super reforms being a major driver,” Webster says. “To me, they’re at that stage now where they’re learning how to use that new technology.”

He predicts that this will take another three to five years, as “anything to do with super just takes a long time”. 

“It’s a shift from a broadcast model to an individual model, and that takes a lot of experimentation and experience and working out what works for your fund and members,” he says. AustralianSuper, for example, has been undergoing its technological shift for a decade and is still learning.

New kids on the block

Another key area of digital development for super funds has been engagement with members, with new digital retail funds such as Growth, Spaceship and Raiz doing this best.

“Probably the most important thing these funds are doing is taking control of the client portal,” Webster says, as “the portal is the most effective way to engage with members as that’s where they can actually do something”.

These young funds are just going through an application programming interface (API) to talk to the registry rather than through external providers, as they “take control of every touchpoint the member has with their fund”.

And older funds are taking heed: Webster points to AustralianSuper and SunSuper’s mobile apps as attempts to also do this, saying that “they’re working out what a client portal looks like that’s not run by Link”.

“Most bigger funds understand that this is the next point in their journey,” he says.

These digital retail funds have also led the way on using tech for member communications. They communicate with members very frequently for example, sometimes even daily with emails and social media.

Furthermore, “what’s interesting about how these funds have communicated is that it’s not necessarily about the members’ super, but [as a] more general news service about how they invest their money,” Webster says.

Older funds in contrast, tend to have a narrower approach focused on returns or making extra contributions.

Putting on the adviser hat

Technology, particularly artificial intelligence, is opening the ability for funds to provide advice to members in a cost-efficient way.

Central to this conversation is the idea of advice versus assistance. The latter is naturally far easier to provide through automated technology, while the former is where debates about personalised advice from a human versus tailored online advice, such as through chatbots, are being lashed out.

Webster has seen a move from an assistance model over an advice model, to which tech has been instrumental.

“We’re seeing some interesting developments happen in differentiating assistance from advice,” he says, as with the emergence of lots of artificial intelligence in this area, this trend is set to continue.

There are programs such as Retirement Essentials for example, which helps just with filling in pension forms; assistance, rather than advice.

This shift isn’t necessarily an issue for members.

“Most people just want help rather than high-powered advice, as they don’t have the assets to needs it,” Webster says. In line with this, IRESS chief executive, Andrew Walsh, says that demand for its digital advice offerings has been greatest amongst clients with salaries over $100,000.

Technological advances have also helped administrators up their intra-fund advice offerings, although Webster says that funds have been slow to take up those options.

“It’ll be interesting to see how [funds] deal with the next generation of technology and … if it encourages them to adopt it more,” he says.

Walsh however, doesn’t see the uptake of intra-fund advice by super funds as an issue. Whether it’s through calculators, phone advice or increasingly robo-advice, he says super funds have done lots in this space.

“Super funds have lots of options and they’re trying lots of things, and waiting for one to take off.”

The true test, Walsh says, won’t be the offerings of digital advice themselves but rather whether members actually implement that advice. The size and importance of the decisions the advice relates to may impact whether they want to see an adviser in person before doing so.

If funds are feeling hesitation to adopt intra-fund advice offerings, Walsh says concern about risk and who is ultimately responsible for the advice may be behind that. Scaling the advice, and being as careful with what advice you don’t give as what you do, may be a solution.

Maximising tech’s business benefits

While implementing technology is initially a big investment, there’s usually a cost savings benefit for funds down the track.

GBST chief executive, Robert DeDominicis points to the consolidation and decommission of legacy systems as an example; this both reduces infrastructure costs and delivers operational activities. Processes and interactions and communications with members can also be automated, which unlocks further cost savings.

Hall also points out that the benefits go beyond saving money, as transaction automation and back-end processing also reduces risk by removing the rekeying of data and reducing the number of complaints from members due to data inaccuracies.

Automation can also have business development benefits, head of Sonata Product at Bravura Solutions, Michelle Lusty, adds: “As you automate, it’s also worth reviewing the business process – ask yourself, is the business process still relevant, or have parts of it become obsolete over time. Take a look through fresh eyes, and prune back and simplify if you can.”

With compliance demands across the industry set to crack down in the wake of the Royal Commission, collecting and utilising reliable data also holds huge business benefits for funds.

What the Royal Commission showed however, is that many funds don’t have complete data sets.

“Good businesses still have bad data,” Walsh says, noting that the company’s RegTech solution has seen an uptake in users this year as the industry looks to better assemble data.

He says that businesses first need good quality data to then start automating things effectively, and in 2018 there has been a realisation that data is necessary to make the most of technology.

Super funds also need to investigate collecting more data on members. For advisers, the most important information they get on clients is often when they are prospective. Yet for super funds, they usually don’t look at anything beyond member age, address and salary.

Walsh says there’s a gap here for funds, with better information for members then leading to enhanced understanding and retirement outcomes.

As part of this, funds need to ensure that their systems are able to respond to regulatory change quickly, as personal data is a hot policy topic globally.

“The consumer data right will shortly be enshrined in law and there is a good chance that open data will soon be a requirement of the superannuation industry not long after open banking,” Lusty says.

Can funds go it alone?

Of course, any conversation about technology and superannuation begs the logical question of outsourcing. If funds can increasingly invest in administration technologies, why rely on external providers?

“We’re seeing a fundamental shift happening in super administration,” Hall says, “particularly in terms of how super funds are choosing to outsource key elements of administration.”

Rather than tech spelling the end of outsourcing however, Hall believes that we will see super funds increasingly looking to outsource and automate back-end transactional services such as processing contributions, paying claims, and processing investment switches.

He says that this will then free up funds’ time to focus on the differentiating parts of their business which have the greatest impact on members.

The outsourcing conversation is cyclical however, DeDominicis finds. Funds administering internally look to outsource from time-to-time and vice versa.

He believes that the future will probably see a combination of both become more common, as funds smart-source so some aspect of administration are provided by third parties while others are internalised.

Lusty backs this up: “There is talk of new models of administration outsource which allow super funds much greater flexibility to choose at a more granular level which functions they wish to undertake and which they wish to outsource,” she says.

“‘Platform as a service’ and cloud services reduce the cost of IT but also provide hybrid models of administration that funds can work with.

“New generation services like real time eventing and fast data streaming services simplify integration models and make it easier for super funds to get access to the data they need.”

Do customers even want it?

According to Hall, “one reason super funds may be struggling with technology is because they’ve spent a lot of time and money trying to design and build the perfect solution which, ultimately, doesn’t resonate with members”.

This is at odds with the idea that technology only serves to help members’ experiences.

Hall says that there are opportunities for funds to take smaller steps that could help rectify this issue, however.

“Transactions can be gradually automated, slowly offering members more opportunities to interact online,” he says. “For those funds moving in to the advice space they can try an automated personal advice solution with out-of-the box member advice journeys, before moving onto building out their own bespoke journeys.”

A gradual approach could also assist funds’ employees in transitioning to a more tech-reliant structure: “For internal processes, automating in a phased fashion enables a super fund to gradually redeploy staff, avoiding a ‘big bang’ implementation,” Hall says.

Pressure points

Two of super funds’ biggest struggles in adopting tech are around budget and prioritisation, with DeDominicis pointing to controlling costs and then deciding where to spend what money there is as key pressure points.

“All companies have these concerns,” he believes. “The best way to manage them is just to do the research and work with experienced vendors.”

In a space where the latest development often dominates conversation, funds also risk being swept up in efforts to implement ‘on-trend’ technology without identifying why.

“This can sometimes lead to initiatives that lack a clear driver or success criteria and this is where we see some of the issues arise,” DeDominicis warns. “Instead of working from the technology solution, funds should start with what they are trying to achieve.”

On a technical level, there are also just practical problems funds face when implementing new technology.

Hall finds that funds with disparate and legacy systems may encounter integration issues if those systems don’t have an open architecture, for example. Funds need to be able to plug and play with a broad range of parties to get the best out of their technological investments with the least integration pain.

Finally, just the practicality of upgrading technology and the risk to disruption of operations during the transition is a concern to funds. We’ve all experienced those eye-roll moments where our phones or computers shut down for a forced upgrade; imagine that for a whole super fund administration or communication system.

Unsurprisingly, Lusty says this is one reason why major technological upgrades can be “scary”.

“The trick is to be really clear on the strategic business objectives, the obstacles that will be removed from the business and break program [updates] down into manageable steps with early wins to give stakeholders confidence of progressing towards the target state,” she advises.