Administration services are hardly the sexiest part of a superannuation fund.
However, they can be the difference between a bad, good or great member experience – as well as affecting financial performance of a fund.
A super fund’s admin services include everything from its call centre, website and mobile app all the way through to the way in which it delivers financial advice.
In March, many members got a first-hand glimpse of what makes a good admin service as super fund phone lines were overloaded with panicked members calling about their plummeting balances, when $450 billion was wiped off the ASX due to COVID-19.
Long wait times and delays in being able to switch fund options caused major frustrations.
Fund researcher SuperRatings’ executive director Kirby Rappell says a key attribute he looks for in admin services is speed. “How quickly does it take key transactions to happen? What portion of calls are resolved first time?” he says.
With super, time equals money. Some funds change their unit pricing weekly, meaning if you call up wanting to change funds or switch to cash, your request might take seven days to process.
The super fund industry is now debating whether it is better to outsource admin services or bring them in-house. For years, funds have pooled resources into third-party companies, such as Link or Mercer, in an attempt to run these services more cheaply.
Advocates of this business model say, what is the point in having 30 funds separately build an app that does largely the same thing?
After nearly two decades leading one of the country’s top admin firms, outgoing Link chief executive John McMurtrie has predicted funds that decide to take their admin in-house would perish.
Like many in the industry, McMurtrie has a clear vested interest, but his point is valid – the cost of information technology and data security is only going up and this would eventually flow onto increased fund fees. Link invests about $250 million a year into technology and funds would have to foot this bill if they decide to take admin in-house.
“If you are an in-house administered fund, there is no way you can continue to compete in the marketplace,” McMurtrie said.
However, in-housing admin gives funds total control over their members’ experiences.
Rappell says in a post-banking royal commission world, trust is everything. “With such a big spotlight on super, it’s imperative funds are getting the quality settings right,” he says.
And over the past five years, Rappell says every super fund crowned in the SuperRatings Fund Of The Year has had in-house admin services, including QSuper, which won this year’s award.
“That control over the member journey seems to be something that shines through,” he says.
The country’s second-largest super fund, Aware Super (formerly First State Super), has recently run the ruler over the different administration service models. After a series of mergers, the fund had three admin strategies to choose from – in-house, outsourced or hybrid.
After careful consideration and competitive tender process, it opted to take services fully in-house.
Aware chief operating officer Jo Brennan says the reason for the choice was two-fold.
Firstly, it boosted quality. The outsourced admin company could palm members off and, sometimes, it would take a series of phone calls to complete a relatively simple task.
“When a member calls us, we want to be able to resolve their question in one phone call,” she says.
Secondly, Brennan says it actually works out cheaper in the long run. Members should start seeing reduced fees after the new system is fully operational in about two years, she says.
Although Brennan recognises that in-house admin is a step some smaller funds might not be able to take. “It comes back to the question of scale. There is going to be a tipping point for smaller funds to be able to set themselves up to do full in-source, which will be more challenging,” she says.
With the entire super industry in a state of self-reflection, now is the time to let your fund know if you have had a bad experience – before major admin decisions on how to contact the fund are made.
Source: Thanks smh.com