Increasing competition between funds to both boost and retain membership

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1 The Journal of Superannuation Management 1 Superannuation Fund Internet Capability Survey 2010 By Wayne Hirt Partner, Superannuation Advisory, KPMG Wayne Hirt has over 17 years experience in all facets of superannuation including consulting, administration, asset consulting, compliance and product design. He has been responsible for the conduct of numerous custody tenders, reviews of pricing mechanisms and control processes utilised by custodians, reviewing rules between the custodians and the funds they service and the management of service provider tenders on behalf of a number of public sector, industry and public offer funds. Wayne has advised a number of custodians and superannuation funds with respect to their taxation policies and accounting for taxation and associated deferred tax assets and liabilities. He also oversees the management of the KPMG Superannuation administration division, providing leadership and guidance in all facets of superannuation fund administration. Increasing competition between funds to both boost and retain membership numbers has driven funds to seek ways to differentiate their online services. With this in mind, our 2008 survey sought to identify those survey respondents who provide extra functionality and/or services to their members via the internet. As an enhancement to our survey we considered in further detail: l What funds were offering their pensioner members recognising both the increase in and the take up of pension products and l The types of calculators being offered noting that the community has an increasing focus on the adequacy of superannuation in retirement. In addition to this, the 2010 survey sought information around the cost of providing the fund s online presence and also how the fund s website is promoted to current and potential members. Participants KPMG first published the Public Offer Superannuation Fund Internet Survey in November Over the years the survey has provided a forum for participants to gauge the relative content and functionality of their online services. From a consumer perspective it continues to serve as a signpost to technical competence and a window to the product issuers offerings. In this survey, we reviewed 29 participants (27 in 2008) drawn from large multiemployer and corporate sponsored superannuation funds. This is the first time we ve expanded the survey to include large corporate sponsored superannuation funds. The seven core areas of functionality and the scores achieved by each participant are listed in Table 1. In addition, we asked what the functionalities were for each fund that offered pensions, adviser access and corporate sub-plans. These sections have been scored separately to the overall score, comprising of the seven core areas of functionality.

2 2 The Journal of Superannuation Management Innovations Apart from the seven areas of functionality which were used for scoring participants, participants detailed any innovative offerings available from their fund s website. Some of the features described by the participants included: l Embedded online audio-visual channel featuring interviews and audio learning l The ability for members to alter insurance cover online l Targeted alert messages on sign-in that prompt the member to take action; e.g. No TFN l Workflow view page, showing requests and links to scanned inbound correspondence received from the member l Online trustee elections allowing members to vote for Directors online l Seminar registration l Ask a question facility which dynamically searches the same knowledge repository that Customer Service staff use l Ability to ask a panel of financial advisers a question online, and review previous questions and answers The addition of the above functionality demonstrates a strong focus on the provision of timely and tailored member support and education services. Big shifts Whilst the majority of participants scored well in the core service areas when comparing results to the 2008 survey, there were several areas of functionality where noticeable differences occurred between the 2008 and 2010 surveys. They included: l Investment choice The ability to allow members to alter their investment choice online jumped from 74 per cent in the 2008 survey to 93 per cent in Such functionality not only improves the self-service aspect of the site, but it also serves as an effective way of streamlining administration processes in the back-office. l Online calculators In 2008, 74 per cent of respondents advised that some type of calculator or projection tool was provided to members. In 2010, this figure rose to 93 per cent. This increase indicates that there is a desire for funds to allow their members to plan for retirement or other eventualities linked to superannuation, such as insurance levels. It is evident from the high proportion of funds offering such tools, that they re now seen as a standard offering in the online space. l Making personal contributions Allowing members flexible methods of topping up their superannuation account is also on the increase. Ninety per cent of surveyed funds now offer members the ability to make online contributions via BPay, direct debit or other alternative means. This figure was 67 per cent in 2008, and 32 per cent in l Benefit estimates Not all funds provide members with the ability to attain an estimate of their entitlement online. In the 2008 survey, 26 per cent of participants did not offer this functionality to their members. Whilst this statistic improved by 12 per cent in 2010, it is still somewhat surprising that, what is considered to be the most appropriate method of providing a member with a clear understanding of their current superannuation holding, is not offered via an online self-service mechanism by all funds. Overall, there were significant advances made in the member online services space from 2008 to 2010, represented by an 8 per cent improvement for the section. This trend indicates a strong push for funds to improve the ability to enable their members to self-serve. l Employer reporting Empowering employers to provide them with the ability to extract and analyse data for their employees is on the rise. The largest shift from the 2008 survey was seen in the employer reporting space. In 2008, only 48 per cent of funds surveyed (who provide employers with online access) enabled employers to tailor online reports and data extractions. In 2010, this figure has risen to 85 per cent. It would appear the battle to maintain default fund status is driving strong competition in this area. There were a few areas where functionality worsened from the 2008 survey. Those areas included provision of risk evaluation tools, information covering economic conditions, online help for employers and information regarding financial planning. These perceived decreases in functionality are attributable to the different survey participants between 2008 and Areas of differentiation There were several areas of differentiation, where less than 50 per cent of participants responded positively. They included: l Displaying the previous sign-in date (28 per cent) is surprisingly low when considering this is common place in other industries in the financial services sector, such as online banking. With an ever increasing risk of fraud, we would expect this to be a developmental area going forward. l Pre-populated online forms (34 per cent) can have a positive impact on the ease in which members interact with a fund. l Displaying historical investment strategies (45 per cent) is considered to be a nice to have and has risen by 8 per cent from the 2008 survey. l Other management costs for the member (45 per cent) and personalised rates of return on investments (28 per cent) we note are low however appreciate that in the interests of accuracy and operating costs, some funds may choose to wait until year-end to disclose such information. l Arranging for rollovers from other funds (17 per cent) and providing benefit payment instructions (17 per cent). Watch this space; the online benefit transfer/payment process is limited due to proof of identity and fund specific customer due diligence. We anticipate this area of online administration to improve over time as streamlining gathers momentum in the industry.

3 The Journal of Superannuation Management 3 Table 1. Industry versus retail funds Table 2. Cost of providing a fund s website Industry vs Retail The majority of participants in the 2010 survey were either industry funds or retails funds (26 of 29). On this basis, comparisons were made between these two market segments across the seven core areas of functionality. Since the 2008 survey, industry funds as a whole have closed the gap with, and in some areas of functionality, have surpassed their retail counterparts. Averages across the two market segments are shown in Table 1. The cost Participants were asked to estimate the cost of providing the fund s website over the past three years. The results emanated from the survey can be found in Table 2. Promotion Given the expense associated with the provision of the funds website, it s important to understand how the site is being promoted in order to maximise the usage by members and employers. As part of the survey, information was sought in relation to promotion of the funds website. The following observations were made: l 100 per cent use member material (e.g. annual statements and new entrant kits), call centre staff and fund newsletters. l 66 per cent use prizes and giveaways. l 59 per cent promote during call waiting on the fund s information line. Other methods of note identified to promote the funds website included the use of social websites such as facebook and twitter, TV and radio advertising, and search engine marketing. Two thirds of participants pro-actively provide members with login credentials upon joining the fund. The remaining third respond to member requests to access the site.

4 4 The Journal of Superannuation Management The survey In the 2008 survey, participants were asked to provide a simple yes/no response to the questions asked. Each desirable response was awarded one point. The 2010 survey introduced weightings for each section, based on their importance. The following is a summary of the issues addressed in the survey and the associated weightings of each section. Website Security 10 per cent of total score Security and privacy are key concerns for all members and employers. Participants were asked to address password security, provision of information on fraud and internet security and sign in/out details. Fund specific information, investment and insurance information 15 per cent of total score The objective of these parts of the survey was to identify the extent to which the participant s website provided access to information about the fund as well as its investment and insurance offerings. The survey asked whether the website facilitated the downloading of product disclosure statements, application forms and brochures and provided information on the provider s privacy statement, enquiries and complaints procedures etc. In relation to investments, the survey looked at the extent of information provided on the fund s investment options and unit prices as well as the underlying managers. It also determined if a questionnaire/tool was provided to allow a member to assess their risk tolerance and if information was provided to enable members to assess the risks of different investment options. In relation to insurance, the survey asked if tools were available to assist members in determining their insurance requirements and styles. Calculators and projection tools 10 per cent of total score The survey asked calculators were available to allow the projection of lump sum and retirement income benefits based on a specified level of contribution, as well as calculators providing the level of contributions required to generate a specified level of retirement lump sum or income. It also asked if a calculator was available in relation to the Government co-contribution. Member specific information 30 per cent of total score Participants were asked whether their website allowed members to view their recorded details including personal, beneficiary and transaction history details. It also looked at the availability of benefit and balance details at the enquiry date as well as last reporting date. In relation to investments, it asked if members could view a personalised rate of return on their investments as well as an overall asset allocation. Member online functionality 30 per cent of total score Participants were requested to describe the functionality provided to members. For example, the survey asked if members could use the website to alter personal details, the member s Personal Identification Number (PIN), provide benefit payment instructions, apply for insurance cover and alter their investment choice. Online support 5 per cent of total score This section looked at the level of support provided to members and employers, including on-line help, and access to help via a helpline or . It asked if the call-centre had the ability to access the member s information as the member sees it on-line. Employer online functionality scored separately Participants were asked to evaluate the extent to which their website was able to assist employers with the day-to-day activities associated with providing superannuation for their employees. This included whether employers could add new members, alter members details, notify tax file numbers and make contributions on-line. This section also asked about the availability of a clearing-house service. Pensions scored separately Where the fund offered account-based pensions, the survey asked if pensioner members could access details of their account balance and pension payments, and whether they could alter their personal details, investment choice and could request changes to their pension payments. Corporate sub-plans scored separately Where the fund offered a corporate division, this part of the survey questioned if the website could be branded for an individual sub-plan, whether elements of the website could be tailored, sub-plan specific documents provided and whether the website could be linked to the employer s intranet. Adviser access scored separately In relation to adviser access, the survey asked if the member s adviser could be authorised to access the member s information and if there were any restrictions on this access. Information technology not scored This section did not impact a fund s score. This section sought information around the cost of providing the funds website, the administration system used, and the website technology being utilised. Website traffic, promotion and other information not scored They were included to investigate if the fund recorded usage for analytical purposes, how the website is promoted and if members were automatically granted access to the site upon joining the fund. Under other information, participants were given the opportunity of advising of any particular innovative features of their websites which were not covered elsewhere in the survey. These sections did not directly impact a fund s score. l

5 The Journal of Superannuation Management 5 Table 3. Survey results

6 6 The Journal of Superannuation Management The Journal of Superannuation Management Published by a Rainmaker Information company Level 2, 151 Clarence Street, Sydney NSW 2000 Australia Telephone (02) Facsimile (02) Disclaimer The Journal of Superannuation Management ISSN Copyright 2010 Rainmaker Information Pty. Ltd. ABN All rights reserved. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 of the Commonwealth of Australia, no part of this journal may be resold, reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. Rainmaker Information Pty. Ltd. gives no warranty other than any warranty that may be implied pursuant to the Trade Practices Act 1974 that the information in this report is correct or complete. Rainmaker Information Pty. Ltd. shall not be liable for any loss or damage howsoever caused due to negligence arising from the use of this report. The views and opinions expressed in this journal are provided for information purposes only and should not be taken as constituting advice. Persons concerned with the issues raised in this journal should seek their own professional advice. No responsibility is accepted by the publishers, its employees, agents or associates for the accuracy of the information contained in this journal. The opinions expressed in this journal do not necessarily represent the views of the publisher.