Digital advice key to super fund future

Digital advice key to super fund future

Superannuation funds that fail to engage their members through digital advice could find their products are no longer competitive as rivals increasingly build a more holistic suite of services.

The need to deliver quality financial advice at scale is growing as superannuation funds strive to close the advice gap for young members and offer accessible advice options to a larger percentage of their member base.

“Super funds’ have an important and fundamental role underpinning the retirement lifestyles of all Australians,” according to Bravura Client Relations and Sales Director – APAC, Paul Dunn.

“Offering greater levels of support delivered through scalable digital advice is becoming an important way for funds to engage and educate members. We are currently working with major super funds to ramp up their digital advice offerings.”

As well as helping members plan for retirement, digital advice can also help funds improve member retention.

“Older members with higher balances naturally seek financial advice, often prompting them to switch to a new fund or a self-managed super fund. This undermines the scale of the fund they are leaving, which is critical to keeping fees and other costs low. Digital advice delivered at scale is part of the solution.”

Rising scale underpins digital advice

The prudential regulator is driving a new wave of consolidation across the $3 trillion super industry as a way to lower fees and improve retirement outcomes.

About eight super funds merged last financial year and about 15 more mergers are in progress, APRA Deputy Chair Helen Rowell told a Senate Estimates hearing in March. The mega scale of these funds has created a new impetus to offer digital advice at scale.

There are now at least seven super funds that each serve more than 1 million members, and more are likely to be created by mergers over the next 1-2 years. The relationship between funds and their members has largely been passive, partly because retirement funds are historically locked away for decades, but the situation is changing.

Midwinter Head of Professional Services Annie McCabe says its digital advice tools are becoming increasingly popular.

“The digital channel can help meet the significant unmet demand for financial advice in the community, particularly for those who would not otherwise seek advice due to its cost or because of inertia,” McCabe said.

Midwinter’s AdviceOS advice platform is used by financial planners and also integrated into Bravura’s registry system, Sonata Alta, which is used by super funds.

“AdviceOS powered advice delivered to more than 170,000 individuals across multiple channels in the last year. Digital advice is helping financial planners become more efficient and deliver high-quality strategic advice – now the same underlying advice engine is also helping super funds deliver advice to their members.”

A 2019 ASIC report on what consumers think about financial advice found that only 1% of survey recipients had received digital advice yet 19% were open to it. About 20% of Australians had considered getting financial advice in the last 12 months but had not gone ahead. Of those people, 37% were open to using digital advice.

“Those who expressed some interest in digital advice saw it as a potentially convenient, lower cost option,” the report found.

Why scalable financial advice is now a reality 

Major super funds are now using their size to seamlessly integrate digital advice with their administration system, which needs to process member transactions quickly and accurately. However, this isn’t a major competitive differentiator between funds unless they can leverage it to also offer scaled advice to members when they need it.

“Funds should be the go-to destination for members during their ‘moments that matter’, such as approaching retirement. The technology now exists to integrate intuitive digital advice with an administration platform, creating quality advice at scale,” said Dunn.

“The advice is immediately executable by the member and produces a compliant Statement of Advice. A member’s relationship with their super fund could ultimately become as seamless and self-directed as the relationship they have with internet banking.”

This combination sets the foundation for straight-through-processing. It creates efficiencies and also allows members to track the status of any advice, such as an investment switch or change to life insurance.

Integrated digital advice is also highly customisable by super funds. For example, a fund can create triggers targeting advice towards certain member cohorts (such as those nearing retirement or those with large balances).

A number of major super funds are currently on this digital advice journey.

Rest Advice Online has been powered by Midwinter’s AdviceOS system since 2016 and gives members retirement advice that automatically generates a Statement of Advice. Rest Online Advice reported a 252% year-on-year increase in interactions over the 2019-20 financial year, with particularly strong take-up from younger members and women.

Aware Super is also implementing an integrated ecosystem of Bravura products, underpinned by Sonata Alta and encompassing AdviceOS, Babel Superstream messaging and member and adviser digital offerings.

Bravura acquired Midwinter and its popular AdviceOS platform in August 2019, which has been integrated into Bravura’s broader wealth solutions.