The numbers around super are staggering.
Australians have over $2.6tn of their money invested in superannuation and contributed $25.4bn* in December 2017 alone. And, with the increase in the super guarantee and the miracle of compound interest, Australia’s super assets are going to increase exponentially over the next few years (subject to market conditions, of course).
Super is also likely to be many Australians’ largest single financial asset or, for many people, their only investment asset. So why, oh why, don’t most people seem to give a toss about their super?
It’s all a little bit embarrassing…
Over the last few years, we’ve worked with a number of super providers, from retail to employee scheme managers. And they all have one thing in common – the vast majority of their members know bugger all about super, how it works and what they can do to make the most of it.
I’ve sat in focus groups, conducted interviews, poured over member data and had the same experience every time. It feels like many Australians are more than a little embarrassed about their lack of super knowledge and engagement – but still do nothing about it.
“I should know what my balance is, but I’ve not looked at it.”
“I don’t really understand super – it’s confusing.”
“Aren’t you looking after it for me?”
These are typical quotes from our research and, while they’re not indicative of every super member, they’re a fair reflection of the overarching sentiment.
The question is: why?
1. Why do Australians struggle to understand or care about their super?
2. Why do they avoid taking simple actions that can fundamentally change their retirement outcomes?
3. And what can we, as financial services marketers, do to change how Australians engage with their super to the benefit of us all?
They are simple questions, with complicated answers.
Super’s simple, it’s our brains that are complex
When thinking about the issues with engagement in super, there are three key questions that we‘ve encountered with our clients:
If, subjectively, super isn’t actually a particularly complicated product, why is it perceived to be?
If members know they have a product designed to deliver a comfortable retirement, why aren’t they making the most of it?
If the actions needed to optimise super are both straightforward and hugely impactful, why don’t people take them?
Some of the answers to these questions lie in how our brains work – how we emotionally and rationally engage with financial matters. Others are industry related. Let’s start with the brain stuff first.
1. Our brains are, like, really complicated
It doesn’t take a psychologist to know that everyone thinks differently when it comes to money. We’ll explore some deeper behavioural attributes shortly, but when you think about basic human behaviour, the super business model doesn’t seem to encourage engagement.
Super generally sees employers contribute around 10% in addition to employees’ regular salaries, without people needing to do anything. Knowing that inaction will be rewarded with growth is not a great place to start.
This perception of inaction still leading to a reward, plus other behavioural finance characteristics like mental accounting, anchoring and overconfidence, teamed with good old procrastination, with a side of confusion, means that it’s a challenging environment for super providers to empower engagement and drive change.
2. Our focus is elsewhere
As a nation, our financial focus is elsewhere. We’re either too young and would rather spend disposable income on avo on toast than plan 45 years into the future, or we’re caught up in the ‘Australian Dream’ of property ownership. Why put spare cash into super, when you can own your home and secure your retirement?
This situation will change, partly because it has to. Housing affordability is worsening and home ownership is decreasing (down to 65% in the 2016 census). With a potential increase in the base rate and an over-dependence on interest-only loans, we may see a cultural shift towards other ways of securing our financial futures, with super best placed to do so.
3. Super providers don’t make it easy…
A significant factor in consumers’ inability and reluctance to engage in super has been created by super firms themselves.
Super providers have traditionally made it difficult to engage with their products. The language of super and the technology supporting it has, until recently, made it more difficult than it needed to be for Australians to both understand and perform the simple tasks to optimise their super.
Super is a simple product made complex
Try Googling the basics of super and see if you can find a definitive, easy to understand explanation. The most comprehensive information is provided by the ATO – and we all know how accountants write content…
Many super funds still deliver content aligned with business needs, written with compliance in mind. Super statements – the one engagement comms piece we all have in common – are often unclear or irrelevant, and advice models are complex, or non-existent.
However, super firms are trying to improve. We’ve worked with several who are trying to change the language of super and improve the clarity of information they provide. However, the legacy of opaque comms has led to a lack of engagement that’s hard to overcome in the minds of members.
Part of the catalyst of change has come from new entrants shaking up the market.
Retail super brands like Grow, Spaceship and Zuper have been designed to meet the needs customers, rather than around existing business and distribution models. While they may have had a few teething problems, they’re all focused on clarity, engagement and putting their customers at the heart of their experience.
It’s a lesson that others are learning, which will benefit us all.
Doing things is harder than it needs to be
The other limiter for existing super firms is technology, which can make the processes to optimise super far harder for customers than they need to be.
For example, last year my wife wanted to consolidate an old super account, to avoid additional fees eating away at her past savings. The process required our financial adviser to be authorised to ask her previous provider on her behalf. The old super company then sent a form back to the adviser, which was then passed on to my wife. That form then need to be completed and and witness by a Justice of the Peace before she could return it.
The idea that to access to your own money you need a JP to give permission demonstrates an industry that hasn’t been built with the best interest of its members in mind.
This anecdote is just one example of how established super firms seem to be constructed to make it difficult for members to do simple things. While we understand that established firms have issues with legacy technology, which makes it hard to deliver a seamless experience, there’s more that can be done.
What can we do?
Firstly, as an industry we must try harder. Try harder to do the simple things right. Try harder to think about our members, rather than our business. Try harder to show members that simple steps can make a substantial difference to their future.
We need to stop creating experiences around our products and start creating them around our members. How many super websites have you seen that focus on the main content sections of ‘Superannuation’, ‘Retirement’, ‘Insurance’ and ‘Investments’? What do those headings actually mean to real people – your members?
Secondly, we need to think about the interactions that make the most difference to our members and make them easy to perform. While technology may present some limitations, making the benefits tangible will make the actions meaningful for people and mean they’re more likely to take them. Simplify the language. Optimise the process within technical constraints. Deliver personalised comms to those who need the help most. Your members will benefit and your funds under management will grow.
Lastly, learn from the new market entrants – both their successes and their mistakes. Clearly they’ve struck a chord with their member-led experiences and communications. Their growth is there to be seen. However, despite these engaging brand experiences the new entrants will struggle to compete if established firms can combine their experience, scale and credibility with truly member-focused offerings and experiences.
Be active, not passive and your members will be the same.
*AFSA statistics March 2018