As more super funds move to manage assets in house and as regulators increase reporting requirements, what parts of your organisation and its processes need to be refined and streamlined? What are the main obstacles for success? What role does technology and third party software have to play? And with the hindsight of COVID-19 which processes do you wish were more automated to cope with the new normal?
Prior to COVID-19 the overall performance of the superannuation industry was strong, with the APRA-regulated sector growing by 6.3 percent in the year to June 2019, despite the cloud of the Royal Commission, while the Self-Managed Superannuation Fund sector grew by a mere 1.6. COVID-19 and the early release of super coupled with market volatility as shone a spotlight on the industry super sector. It has been a true test to ensure super funds are operationally ready, to take on this growth and expansion of function and members.
Following the Royal Commission, we have seen an increasing trend in Superannuation Funds insourcing parts of its investment management coupled with an overall increase in reporting and regulations requirements. As a growing industry that is challenged by increasing competition and increasing regulatory pressure, participants should be looking at investing in the future and implementing the most efficient workflow solutions. The industry has underinvested in technology for at least two decades and now is the time to ensure the increasing demands on superfunds is set up for success. An investment in technology that eliminates errors (whether it be in trading, reporting or calculating fees) and improves workflow, will help to build trust in the industry, and the not for profit sector is perfectly positioned to take the lead.
The future is in technology and a technology led operating model is likely to make it more cost effective for funds to meet the higher expectations placed on the industry by the regulators and consumers, not to mention the data that can be gathered to truly place members at the centre of everything they do.
Challenges can be divided into two levels; organisational and industry. When a challenge (such as new reporting requirements) is facing the whole industry the likelihood of finding the best solution is greater through collaboration with industry peers than isolating the conversations internally. The industry should talk more openly about its challenges and look to solve together where possible. It is only then that economies of scale will come into play. It is amazing what can be achieved by just talking it through. The challenges are common and solving the problem may not deliver any particular super fund a competitive advantage but it will free up more time to focus on creating your competitive advantage.
This view is nicely summarised by a paper written before the Royal Commission.
Quote from FSC & Trustee Tailored Super paper on Innovation in Superannuation:
“Industry should lead innovation. Innovation may be disruptive, but often it occurs in a collaborative manner and is necessary, particularly when the operating environment changes.
By definition, it involves a changed mindset – doing the same thing, thinking the same way and using the same consultants will likely produce the same outcomes. Trustees need to understand that the status quo is not always sustainable, nor is it in the best interest of members.”
What does a change in mind set entail – as super funds start to insource more investment management this brings with it the ownership of more business processes and reporting requirements. Therefore, Super funds need to:
- Explore outsourcing opportunities for some of these processes, this will enable funds to remain focused on their core objectives – their members.
- Take the burden of certain processes off the table with enabling technologies.
- Look at the benefits of data systematically gathered for reporting purposes that can improve member experience and outcomes. A technology or disruptor partner could be the winning strategy for the future.
To do this requires a new way of thinking. Super funds must first recognise the limitations of current business models and embrace and invest in the future. Ultimately, it will be the funds that are willing to be the first to embrace this new technology-led outsourcing, that will not only survive and thrive in this new world of superannuation but will be the first super funds to truly own their entire member journey.
Principal – Asset and Wealth Management
Ref: NMG Super Funds Review 2019-20