Getting a focus on technology

With meeting the requirements of the regulatory agenda now largely under control, Damon Taylor Writes that the focus has returned to technology innovation. 

As Australia’s superannuation industry approaches 2015, it seems funds’ regulatory juggling act may be finally drawing to a close.  

Having spent years focused on reform, funds now have an opportunity to reassess their priorities and for Graham Sammells, Chief Executive Officer of IQ Business Group, many have realised that from a technology perspective, the market has changed. 

“So I think it’s a highly held hope that the pace and the extent of regulatory change is now going to slow down,” he said. “The implementation phase of MySuper and SuperStream seems to be coming to a close and so trustees and their executives are finally able to put in place plans for a bit of innovation, particularly with respect to technology.” 

“But what’s changed and what’s significant, I think, is that the area receiving the most emphasis is actually funds’ member facing services,” Sammells continued. “Internet services, member portals, responsive websites - its all about how funds are interacting and transacting with members through their computers at home and on mobile devices.” 

“And what it comes down to is the realisation that when it comes to interaction, members’ expectations are being set by their experiences in completely unrelated industries and, to date, the super fund experience has been found lacking.” 

The reality, according to Sammells, is that all businesses and institutions are being dragged into the digital age. 

“Whether member expectations are being set by their banks, by online shopping or by their children’s schools, super funds aren’t going to be able to escape comparison,” he said. “So they’re going to have to compete on that level or risk being left way, way behind.”  

According to Darren Stevens, Director, Product Management and Strategy for Global Wealth Management at Bravura Solutions, the reform agenda had not stopped super funds from trying to innovate but it had certainly limited the effect of such efforts. 

“But the prime motivator, from what I see, is a shift in superannuation decision making away from employers and advisors, where it has been traditionally, back to the member and the consumer,” he said. “They’re actually taking a lot more control of their super and while we see that in trends within self managed super, we also see it in the individuals as their accounts are growing, as they’re getting more financially literate and as they’re getting more exposed to financial services technology.” 

“Online banking on smartphones and tablets is probably the perfect example,” continued Stevens. “Because fund members are starting to expect that same level of service from their superannuation providers as well.” 

“We’re seeing a shift in decision making and so funds are needing to change the way in which they retain and grow their business.” 

Reiterating much of what Sammells and Stevens described, Martin Spedding, Executive Director for DST Bluedoor, said that the increased accessibility of technology had also been a factor. 

“There’s been great change in technology over the last few years and that’s driving a lot of the innovation,” he said. “There are things that are possible today that simply weren’t a few years ago.” 

“So when it comes to innovation, I think everybody’s looking at it but there are also two groups of participants within the super industry - those that have bitten the bullet and dealt with re-platforming their technology and those that haven’t,” Spedding explained. “The former, those that are effectively through the gate, have obviously got a lot to play with.” 

“They’ve got modern architected systems that support increasing member engagement, developing new products and extending their existing offer.” 

But for Spedding, while the rest of the super industry may still be trying to innovate, their lack of a modern architected platform cannot help but limit their ability to do so. 

“So they’re still looking at driving innovation but they have to do it in a different way,” he said. “It has to be a little bit more piecemeal and they’re reliant on different vendors to provide parts of the solution, maybe an equity trading capability or term deposits or whatever else it may be.” 

“They’re forced to look at add-on type applications so that they can have some sort of digital presence,” added Spedding. “But one way or another, they’re going to have to bite the bullet and deal with their basic technology platform.” 

“Because when they do so, that’s where the competitive advantages lie.” 

Yet when it comes to technology-based innovation, much of the industry’s recent work has focused on data, data management and data segmentation. And as a consequence, funds have gained greater insight into everything from member communications to investment but for Stevens, funds have only started to scratch the surface of what is possible.   

“So as I said before, funds have already realised that they have to become far more member-centric in everything they do and in the UK and the US, we’re actually seeing that in product development,” he said. “They talk about household accounts and its essentially about having a member who has a whole series of relationships.” 

“So they’ll have a relationship with an employer and that employer may be making their superannuation contributions and, as a result of bulk buying power, they can get lower group insurance rates with automatic acceptance,” Stevens explained. “But they have other relationships with advisors or they might have relationships with dependents and so its really about understanding all of those relationships and building products that support the household group, the individual member and how they relate to those other entities.” 

“If a fund can do that, they can then provide other products and services through to members, be it scaled advice or even products from other providers such as life annuities in their retirement phase.” 

So what funds needed from their technology, according to Stevens, was solutions that could establish such links, administer them cost effectively but also allow people to proactively personalise their experience. 

“So the segmentation everyone’s talking about that tends to be the first step in the process,” he said. “You’re gathering that information but its when members start to interact with these solutions that they get taken through different user journeys.” 

“And we’re starting to see that happening already,” Stevens added. “I’m listening to funds today talking about the fact that they want their systems to be smart enough to identify the journey they want to send a person on based on their demographics, their previous transactions and some broader psychometric type trends in the marketplace.” 

“What you’re seeing is them taking that segmentation and moving it to the next level and building that into their actual systems.” 

Agreeing with Stevens, Spedding reiterated that with a modern architected system, super funds could have all of this information in the one place, where it was easy to access across the entire membership or by the individual customer. 

“There’s a lot of very rich information that can be used in terms of platform functionality, in terms of data that’s needed for decision making and ultimately, for portfolio performance,” he said. “And the aggregation of that data across a platform will actually let providers undertake reporting based on regulatory requirement, reporting based on performance and take a lot of high quality information and metrics back to their customers as well.” 

“It can be very powerful in lots of different ways,” Spedding continued. “So its those funds with good technology that have access to that data and have the ability to use it both from the customer’s point of view and for the customer’s benefit.” 

“Its an asset to the fund and the benefits can be quite significant.” 

So with any number of technology focuses available to super funds, from member experience right through to backoffice efficiency, Stevens believes the challenge lies in knowing where to commit resources and when. 

“Typically, the number one focus for trustees and the people they have running their fund is compliance and having to meet the compliance burdens that have been thrust upon them through regulatory change,” he said. “But as a service provider, we do try to alleviate that.” 

“We’ve got a large community of superannuation clients and they benefit from the fact that we share IP (intellectual property) because they can then do shared development around that.” 

“But the next thing you’re seeing people do is sit there with systems that are still legacy architected,” continued Stevens. “And they’ve got to make a call as to when they move from their current architecture to a modern architecture that meets these new platform needs.” 

“There’s an efficiency increase there waiting to be realised but those old systems are also architected in a way that is employer centric,” Stevens continued. “So it speaks to member-facing technology as well.” 

“So what we’ve seen a lot of funds do is try to bolt on 'best of breed’ type solutions into that old scale architecture.” 

And while Stevens admitted that such an approach had worked to an extent, he said that it had also created a number of brittle solutions that would make a full platform transition even harder in the future. 

“So it is a real balancing act for them,” he said. “But the bottom line is that legacy architected systems simply don’t facilitate the new world that the industry is moving into.” 

“Funds are going to have to make a couple of tough calls about when they’re actually going to go to a new solution that’s got the modern structures and modern architecture to support that.” 

In a superannuation environment in which multitasking would always be essential, Sammells advised funds to focus on member facing initiatives, but to do so in small iterative ways. 

“I think the trick here is that funds need to invest in member facing initiatives,” he said. “But they need to find out what works, what has the most impact and to prove the business case on a small segment, a small scope or risk failing very, very quickly.” 

“If you tackle technology change that way, you can typically get away with much smaller investments that can end up being very powerful,” Sammells continued. “And that’s as opposed to investing a great deal more in the backoffice in an effort to obtain overarching operational efficiency.” 

“That might still be necessary but it should be the number two priority on funds’ strategic intent list.” 

For Spedding, a super fund’s approach to technology change would be heavily dependent on their member demographics and the work they had done to date. 

“But if they haven’t gone through the gate to a next generation platform, then clearly that has to be their highest, longer term strategic priority,” he said. “Outside of that, I would also say that funds can’t afford to be focused on just one thing.” 

“On the back of MySuper and SuperStream, the industry’s two key drivers are going to be the cost and efficiency in which a fund administers and manages customers’ superannuation accounts and secondly, the features they offer and the engagement which they offer to their customers,” Spedding continued. “So on the one hand, there’s the customer-facing aspects of technology in the digital space but on the other, there’s the need to find more and more efficient online, straight through processing opportunities.” 

“And I don’t think you can separate those - they’re both key and they’re both things trustees will need to be focused on for a long time to come.” 

Stevens’ closing comments were that in embracing technology, super funds needed to understand their value proposition as well as their target market. 

“But most importantly, they need to understand how they’re going to acquire and retain their business going forward,” he said. “Because if they can do that, it will tell them who their competitors are, how quickly they need to act and exactly how proactive they’ll need to be in the future.” 

“And I’m talking to a number of funds at the moment who have done exactly that,” Stevens added. “They’ve clearly identified that they want to win business and grow business.” 

“They know that they want to compete with industry providers and retail providers and they’ve realised  that they have to change their operational model to reflect that.”