Feature: Disruption in superannuation

20-Dec-2017

By Sarah Kendell and Megan Tran

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The protected nature of Australia’s superannuation system, which guarantees both established industry and retail funds revenue through enterprise bargaining and corporate mandates respectively, has meant innovation in the sector has stalled for a number of years and most super funds’ engagement with members is limited to quarterly balance statements.

But one of the more interesting financial services trends of 2017 has been the emergence of a new generation of funds targeted at millennial consumers, offering more compelling investment options focusing on the businesses of tomorrow, simplifying the contributions process and helping members to cut costs when it comes to investments and insurance.

At this year’s Financial Services Council Leaders Summit, the council’s chief executive, Sally Loane, named technology-focused fund Spaceship, and digitally based start-ups Zuper and Grow Super as some of the leading names to watch in the space that were making super into a more seamless experience for younger investors.

Zuper co-founder Eran Thomson says the fund, which is currently in the soft launch phase, wants to simplify super and make it more accessible for millennial professionals.

“We speak their language and deliver a service in a way that makes intuitive sense – it works the way they expect things to work in the world today,” Thomson says.

“We have taken something that’s perceived as boring and complicated, but very important, and made it easy to understand.”

The fund offers members the ability to make non-concessional contributions direct from their bank account using BPay, uses push notifications to actively inform about portfolio performance and employer payments, and allows investors to self-manage a portion of their portfolio, as well as screen investments for ethical concerns.

Grow Super co-founder Mathew Keeley, a certified financial planner with his own advice business, says he has similar ambitions for the new fund, which he hopes will teach millennials valuable lessons about personal finance that they often don’t get access to until their senior years in the workforce.

“People leave school and go to work five days a week and at 55 they see a financial planner and want to know when they can retire – they have no idea where the goalposts are even though they have all these other goals,” Keeley says.

“Rather than a super company, we see ourselves as a business that is trying to drive good financial behaviours and change someone’s life by giving them the tools to do that and using language they understand.”

Grow’s ‘version 2.0’ release is currently in the works and includes the ability for members to make contributions from a nominated bank account by rounding up everyday transactions and to adjust their insurance premiums based on their age, occupation and desired level of cover.

While it’s still early days and the influx of new funds may slow to a trickle in time, they are ultimately encouraging incumbents to lift their game when it comes to investment in technology and member engagement, according to James Coyle, chief customer officer at fintech firm SuperEd, which offers robo-advice services to funds and their service providers.

“Ultimately the system should be better as a result of these disruptors and fund members should also be much better off, [though] it doesn’t of course mean that all the disruptors will survive and thrive,” Coyle says.

“Some could become major players in the industry. Others may simply force the traditional players to think and do things differently.”

Thomson agrees that with the entrance of Zuper and others to the market, the larger funds have been forced to up their game from a technology sense.

“We’ve met with a few super funds and banks who have been consistently impressed with how we have built out the interface and the simplicity of the design and language that we use throughout the platform,” he says.

“This is the great thing about a financial services environment that fosters competition and innovation – ultimately a rising tide lifts all ships and all Australians win.”

With the emergence of new funds coinciding with legislation to give workers on enterprise bargaining agreements more choice about where they direct their retirement savings, a sleeker, more efficient super system could be evolving, according to Loane.

“A competitive market creates discipline on existing funds and enables innovation, and should be welcomed – no individual super fund has a ‘right’ to new members, so we should encourage new entrants as well as encouraging subscale or inefficient funds to leave the market,” she says.

“[But] whether any individual fund will succeed in the long term and add to the range of products in the market is yet to be seen.”

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