Member engagement a priority as costs rise

17-Feb-2017

By Leanne Abbas

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Superannuation funds continue to invest in areas that enhance member engagement such as education, advice services and data analytics, according to a Rice Warner survey.

The group’s sixth Superannuation Expense Benchmarking survey found expenses differed widely between funds depending on the fund sector.

Retail funds showed the highest recent increases as well as the highest operating expenses per member.

Meanwhile, industry funds produced the lowest increases and expenses between 30 June 2014 and 30 June 2015.

“The public sector funds have also experienced a low increase to expenses per member, with corporate funds being the only sector that has experienced a decrease – but this comes from a declining population as the more expensive smaller company funds have outsourced to multi-employer funds,” the report stated.

Furthermore, the report acknowledged that funds’ overall operating expenses fell over the year to 30 June 2015, mainly as a result of lower technology costs once recent reforms like Stronger Super and SuperStream had come into force.

“The upgrades [because of legislation] generally have large upfront development costs with a lower trailing expense per year for maintenance,” the report stated.

“The large decrease in the 2015 financial year expenses are largely a function of SuperStream-related projects being completed or winding down.”

On the other hand, fund compliance costs had risen by an average 29 per cent as a result of the new Australian Prudential Regulation Authority standards.

“Funds are increasing the size of their compliance teams to meet growing board, regulator and community expectations around risk management and governance,” the report revealed.

Marketing and communication costs had also increased 17 per cent, as the introduction of choice of fund legislation in the mid-2000s had seen the super sector become increasingly competitive.

The report also outlined that the distribution channels that traditionally defined industry segments had become blurred, with most industry funds offering advice to members while many retail funds were now available without advice.

As a consequence, expenditure on member engagement activities had increased significantly, the report noted.

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