Superannuation funds in Australia have revealed significant appetite to expand their provision of advice by digital means, however many funds still have work to do in this field, according to findings of a new survey assessing the digital readiness of such funds.
While 80% of funds surveyed recognised digital advice as an absolute must, only 20% of them so far were investing in it. However, this percentage is double what it was just four years ago.
The survey, of 15 major Australian super funds, representing about 30% of the assets of APRA regulated funds, was conducted by the Association of Superannuation Funds (ASFA) Research Centre for Decimal Software.
The survey also found 80% of funds had been developing a digital program for less than three years and 15% of funds were only just starting that work. Most funds surveyed had spent A$2 million (US$1.5 million) or more on digital projects.
Investment until now has focussed on foundational capability, in areas including new websites, member online experience, calculators, data analytics capabilities and upgrades to administration systems.
Less than 30% of funds have started implementing an enhanced mobile experience for their members.
ASFA CEO Dr Martin Fahy said funds were still mostly making use of traditional methods to engage with members and only a minority were making use of mobile apps.
“The survey showed the main impediments to implementing digital advice were business case and access to resourcing,” he said.
“Regulatory requirements and the cost of implementation are also a deterrent.
“It is clear that regulatory and policy changes have crowded out innovation. Industry estimates suggest various regulatory changes have involved capital costs for the sector of between A$2 billion and A$3 billion.”
Decimal CEO Nick Pollock said the starting points for digital advice were calculators and engagement tools and the key drivers were better outcomes for members, cost effective delivery of advice, providing member education and the retention of funds under management (FUM).
The metrics being used by funds to measure the success of digital tools include: the retention of FUM and members; open rates; click through on emails; unique versus repeat visits to websites; active member choice, direct investment choice; additional contributions; take up of tailored insurance arrangements; and, take up of advice.
For 80% of the funds surveyed, their digital journey had started and stopped with calculators.
Funds reported the main barriers for their members using digital advice were: that it was difficult to understand (50%); took too much time and effort (35%); and, there was a lack of trust (28%).
In terms of future priorities, funds identified straight through processing, dealing with insurance claims and member online services as key.
Mr Pollock said investment in digital delivery had the potential to deliver meaningful engagement and improved member outcomes.
“Multi-channel digital advice offerings via compliant and automated advice platforms would enhance fund brands and reputations,” he said.
“Going digital can lift engagement and help drive retention of members and grow their balances.
Mr Pollock said Decimal research had shown 70% of members engaged with digital advice were on track for an ASFA standard comfortable retirement and funds offering digital advice were demonstrating around 20% more member retention.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. ASFA’s mission is to continuously improve the superannuation system so people can live in retirement with increasing prosperity. Decimal aims to make financial advice more available to all Australians via digital advice solutions.