This year marked IQ Group’s 21st year of operations in Australia. It’s a significant milestone and we recently toasted to our company’s growth over the last two decades with all employees.
21st birthdays are a grandiose affair for many and IQ group wanted to celebrate its symbolic ‘transition into adulthood’ with all our staff at events around the country (see some of our happy snaps below). We have taken the time to reflect on our past successes and acknowledge how IQ has matured over the years to be the successful company that it is today.
Just like a young adult turning 21, we look forward to taking the knowledge and experiences we have accumulated over these years to branch out even further. IQ has always focussed on looking for opportunities and making the most of them and we will continue to do this with supreme enthusiasm, professionalism, and support for the superannuation and wealth management industry.
The last couple of years has seen an unprecedented amount of change for financial providers in Australia. It’s been a challenging time and we are very proud of the work both IQ and our clients have done to adapt and to continue to grow during these times.
We’d like to congratulate and thank all of our clients – not just for their dedication and commitment to their customers – but for showing incredible business resilience and ultimately helping the Australian economy stay strong over the past 12 months.
The key, commonly a symbol associated with turning 21 for young individuals, represents a sense of freedom and earning one’s place in adulthood. It signifies an ‘unlocking’ of the future. IQ has well and truly earned its place in the super and wealth management industry and as we turn 21, we continue to unlock the futures for our clients and empower them to be the best they can be.
The government’s new YourSuper Comparison tool serves the purpose of making MySuper product performance clear, simple and comparable but most importantly, it calls out underperformance against APRA’s benchmark testing.
I am a fan of online calculators and tools which make planning and decision making easier for the everyday person. Overall, I think the tool is a great initiative …. for those that invest in a MySuper product.
Features that meet the brief
Fund performance: The tool itself provides 3, 5, and 7 year returns and fees, for products with information tailored to a member’s current super balance (provided they log into the personalised version through MyGov). The user interface requires little effort to obtain some useful, easy-to-digest performance and cost indicators. A lot of people will find the tool easy to use and compare the performance of funds, and ultimately decide whether or not they’re getting a good deal.
Multiple funds: Another feature that can work well towards improving member retirement outcomes is the indication of more than one super account. Consumers can choose to consolidate multiple accounts within the tool, after deciding which of their funds performs the best. All super simple stuff.
The missing piece
Once I started playing with the features and comparing funds, it prompted me to check the product performance for both myself and my wife. And this is where the tool begins to fall short.
We don’t invest in MySuper products, so the tool doesn’t provide insight into whether our products are performing against APRA’s benchmark, nor does it provide the ability to directly compare our products against other products in the tool. This leaves us, and many others, in a position where comparability will remain relatively difficult. Given that only around 30% of superannuation assets are in MySuper Products*, I believe that member engagement will remain low.
That said, if I was in a MySuper product, the tool would be a catalyst for me to investigate products based on performance and cost. Many Australians will likely go through the process of changing funds if the tool shows their product coming up shorter than others. The problem is, I only became aware of the tool because I work in the superannuation industry. If I didn’t, in all honesty, I would be blissfully unaware of its existence and the potential benefits it holds for my retirement. More is required to create awareness and use of the tool.
Of course, the biggest benefit of the tool is that it calls out whether a product is an underperformer. An absolute fantastic feature if you are in a MySuper product, and actually use the tool. Whether people will find their way to it is the big question. The fact that funds were required to write to their members in September if they had an underperforming product, and direct them to the tool, is something that really struck me. Letters were sent to a million people. At present, approximately 70,000 of those have closed their accounts and moved to better products …. a 7% strike rate! If these members can’t be engaged in the tool, then what are the odds of anyone using it? And not to strain the point, but again this is only MySuper product members.
At the end of the day, super members who invest in a MySuper product and make their way to the tool will likely end up with a better deal and that’s something … which is always better than nothing at all.
At the recent AIST Super Insurance Symposium, the increased scrutiny on the provision of insurance-in-super was well and truly highlighted, along with the impacts to insurance-in-super products and services that stem from the vast change occurring within the industry.
Since the idea was born in 1923 to have a comprehensive national insurance scheme for retirement, sickness or disability, the inclusion of insurance-in-super into the national retirement income system has come a very long way. Today, the super industry remains the leading supplier of death and total and permanent disability insurance in Australia and trustees are under more pressure than ever to offer affordable default insurance cover that is in their members’ best interests.
Underpinning the ability for trustees to better understand what is ‘affordable’ for different cohorts of members, as well as how to manage and maintain their insurance offering, is a complex web of data management.
The data challenges
implementing a ‘single source of truth’ and appropriate data governance;
updating systems and technology that is fit for purpose now and into the future;
updating and embedding architecture to collect, triage and use data in a timely manner;
finding (and keeping) people with the data skills and capability required; and
ensuring processes have the right balance of people and technology for the benefit of both company culture and member experience.
Where do funds get started?
data strategy needs to be supported at the executive level to ensure objectives and outcomes are communicated to all;
establishing a data strategy, and attaining data maturity, involves all facets of the organisation and must be mapped to the People, Process and Technology Frameworks;
establishing data maturity should be seen as a journey where you first crawl before you can walk, and then run. Getting the foundations right in terms of operating model, architecture, data domains and reporting metrics is critical in order to automate data extraction, make it near-real time and make it easy for all stakeholders to consume; and
technology now allows us access to huge amounts of data across systems, but to leverage that data requires a structured an incremental approach.
Better outcomes for members
Many Australians are still unaware they hold insurance through their super fund. So how do trustees ensure this huge amount of effort and investment pays off with increased member engagement? How do funds know what the ‘right data’ is to obtain members attention, gain their trust and guarantee their emotional buy in? How do they source the ‘right people’ who know how to orchestrate the data for use in the ‘right channels’ at the ‘right time’? Funds should consider mapping the member journey then focus on high value use cases and targeting specific problems in order to unlock the answers to these questions.
For super funds to stay ahead of the game, it simply boils down to how best they, and their administrators, manage data. If the Government announces a review into insurance in superannuation – as recommended by the Productivity Commission – it might lead to the biggest shake-up of group risk insurance in decades. The coming APRA Insurance in Super Heatmap will also cause waves. Speakers at the symposium emphasised that how funds go about designing products and managing claims will be critical to creating optimal insurance outcomes for members. It will require further innovation and flexibility on the part of super funds and their providers.
IQ is well equipped to support clients in building a customised insurance roadmap to ensure they know their members, design suitable and appropriate insurance products, monitor insurance outcomes and empower members to make appropriate decisions. It isn’t easy, but we’re here to help!
In the GFC’s wake, the Banking Executive Accountability Regime (BEAR) was established. This regime was implemented to complement existing legislation in place for the executives in charge of Australia’s Financial Service Providers, and expanded on the lists of accountable entities and persons subject to statutory and common law duties. Among these duties are care, diligence and risk management – focus areas that lacked rigour in the lead-up to the GFC. Additionally, the BEAR regime established variable remuneration requirements, and sanctions for non-compliance, further disincentivising harmful executive action and behaviour.
The Financial Service Royal Commission ushered in a renewed focus on the checks-and-balances in place for the custodians of Australia’s Financial Service Sector. This kind of scrutiny had led to the creation of BEAR. The results of this scrutiny were findings of an ineffective accountability-net and lackluster sanctions for non-compliance to BEAR, necessitating reforms. These reforms came into force with the creation of the Financial Accountability Regime (FAR) – an expanded legislative effort to correct the shortcomings of BEAR.
The implications of this expanded regime are tremendous for the Financial Services Sector:
Firstly, all APRA-regulated entities are now within the accountability-net, not simply Authorised Deposit-taking Institutions (ADIs). Superannuation funds and Insurers are thus under increased scrutiny under this regime.
Secondly, subsidiaries and significant related entities are included within this broader net. Included here are related foreign entities with Australian operations. This presents a much broader accountability nexus that was previously less scrutinised.
Thirdly, both directors and senior executives are deemed to be “accountable persons” in terms of the regime if they satisfy either a ‘general principles test’ – management or control of a significant/substantial part of an ADI/groups operations – or hold a prescribed position (determined by the Minister). The Prescribed positions have expanded significantly in number and superannuation positions are noted to include those responsible for member administration, investments, financial advice and insurance offerings.
Fourthly, FAR requires that ‘reasonable steps’ need to be taken to ensure that they, and the organisations they represent, are adhering to the obligations imposed on them. This is enforced by the required accountability mapping and accountability statement requirements established by BEAR.
Lastly, FAR enforces variable remuneration withholding to further encourage FAR compliance, and establishes significantly greater sanctions for violations of the regime.
What does this all ultimately mean?
Well, we’re effectively looking at an accountability dispensation that, to date, casts the widest accountability net to the widest range of accountable persons, establishes the most incentives (and enacts the most disincentives) for compliance, and holds fiduciary standards to their highest standard. It remains unclear how effectively this will actually be implemented, but it is by far the best attempt at holding executives and other relevant parties to account for their actions in regard to their fiduciary duties.
The recently released Guidance Note for developing a vulnerable member policy, is designed to help super fund trustees develop their own policy for identifying vulnerable members and access assistance if they need it. It can be seen as less of a directive, and more of a series of helpful pointers.
The Guidance Note was issued by AIST, ASFA and FSC in July this year, following a year of preparation and consultation. Its aim is noble: no more will those that don’t speak ‘finance’ as their first language feel unable to enjoy the benefits of growing their super; or those that may not have the traditional identity documents to hand feel quite so helpless in the face of adversity; even those that are not yet equipped with the financial savvy of the battle-hardened, soon-to-be-retiree should not feel so daunted by the choices that lie before them. Help is at hand, or at least that is the premise.
The Guidance Note offers information on what assistance is available, how these services can help and things to be aware of when communicating with members, in whatever format.
So, what is a vulnerable member?
‘Vulnerability’ in this instance is referring to anything that may affect a member’s ability to interact with their super fund. The Guidance Note concentrates on the following:
Aboriginal or Torres Strait Islander identity
low level literacy
non-English speaking backgrounds
mental health conditions
Members can become vulnerable at any time, and this can be a permanent or a temporary state. But it is important to note that just because a member might fit into one of the categories, it does not mean they consider themselves vulnerable.
The complexity is around how to sensitively identify a vulnerable member, and then how to offer help in a considerate way and manage the interaction.
Why is help required?
If a member cannot communicate effectively or comfortably with their fund, it can lead to bad outcomes. Maybe the member leaves the fund, maybe they end up with a smaller retirement pot, or maybe their insurance claim is declined.
What is the reasoning?
In developing a policy, trustees gain an understanding of what help they can and should offer, and how this can enhance their relationships with members. For example, offering publications in other languages, publicising access to relay or advocate facilities, ensuring that their websites are uncluttered and simple to use, and always using Plain English.
In essence, the Guidance Note has respect at its core; respect that members are individuals, and may at times like a little extra help when interacting with the fund. It even includes a ‘respect provision’ setting out just that:
“Members must always be treated with respect, and fund and insurance staff must always be respectful of a member’s or their representative’s personal circumstance.”
Funds will be setting out how to identify vulnerable members and putting training in place, whilst developing their policy and reviewing processes and systems to cater for the diversities that are uncovered.
In an ideal world, every member would be able to interact with their fund in a way that suits their individual circumstances, language, level of financial literacy and preferences. However, in the real world … that’s just not possible. The big challenge is for trustees to look deeper into their membership and show a level of flexibility to support those who need it, while staying within the confines of legislation – to include everyone whilst alienating no-one, and to do so without depleting members’ funds or staff resources and morale.
Trustees will gain a more thorough understanding of the make-up of their membership. If harnessed correctly, this could help promote the services and assistances that would have the greatest natural take-up, which in turn may help whole sections of previously disengaged members find new value in their super fund and feel more empowered to make choices that will lay the foundations for a healthy retirement – financially at least.
It’s going to be long road; one that funds are just starting out on. But it will be an insightful journey and one that has the potential to really enhance the reputation of the super industry as a whole. The industry’s time of mythical money-hoarding is now long-distant. It is moving to a place of investing truly and soundly for every member’s future. Who knows, other industries may follow our lead and aim for this same level of equality that we all strive for?
IQ Group have the knowledge and expertise to ensure funds stay on track to deliver improved outcomes for members whilst implementing these changes along the way and we look forward to partnering with clients to support them on this journey.
Graduate Consultants, Courtney and Tana share their key insights from the third and final session at last week’s Women in Super event. This session was presented by Gemma Pinnell (Director of Strategic Engagement, ISA); Georgia Brumby (Director of Advocacy, ISA) and Steve Bracks (Chair, Cbus). Thank you to Women in Super for organising this event and for continuing to represent the voice of women in superannuation.
With more women joining the workforce every year, and more employers advocating for the importance of senior women in their organisation, why are females retiring with, on average, a third less savings than men?
Surprisingly, 68% of Australians believe that they are still getting paid superannuation whilst on parental leave, hence awareness is low. The inequality in superannuation outcomes means that, overall, females are worse off than males (mostly due to unpaid work whilst raising of children). The ISA’s 2021 report on ‘Paying super on parental leave’ shows that:
Older women are the fastest growing cohort for homeless in Australia.
Single women are most likely to live in poverty compared with males.
Women make up most pension payments.
Women older than 60 made up the biggest proportion of Job Seeker recipients before the COVID-19 pandemic.
ISA analysis shows Australian mothers have missed out on 1.6 billion in payments, such as the Commonwealth Parental Leave Pay.
Additionally, other data shows that:
Taking 5 years off to look after children costs a woman (on average) $100,00 off their retirement savings.
If not changed, the super gap will still exist out to 2061 and beyond.
Changes required at all levels
Whilst these statistics are alarming, changes can be made at all levels, as follows:
Commonwealth Parental Leave Pay (CPLP) is the only parental leave available for the 1 in 2 Australians who work in the non-government sector, with over 99% of women taking up this scheme. If the Commonwealth paid super on this scheme, a mother of two could be $14,000 better off at retirement.
State and Territory Governments
Enforce rules that ALL employees of the state are paid super on parental leave.
Taking it upon themselves to pay super on parental leave (putting pressure on governments to do so).
Women (with 2 children) on a median wage, receiving both the CPLP and employer funded parental leave, would be $26,500 better off at retirement.
Percentage of industries, that pay parental leave superannuation, needs to increase
The ISA analysis shows that:
Only 6.9% of enterprise agreements include a provision to pay superannuation on paid parental leave. This means over 2.3 million employees do not receive it under their enterprise agreement.
If all employers were to pay super on their paid parental leave, around an additional 1.7 million women would benefit.
Advocacy required for awareness and policy changes
The following integrated advocacy strategy was proposed by ISA for advocating change at both Federal and State levels:
Establish a credible policy evidence base
Public relations in local media markets highlighting how many women have missed out
Targeted government relations, including MP briefings
Advertising campaign using real members to highlight the inequity
Positive legislative change for members.
As the evidence shows, considerable improvement is required to improve gender equality for women in regards to their employment and superannuation benefits. Whilst both Federal and State/Territory Governments have an important role to play, employers have an opportunity to lead the way in this space – both in terms of paying super on parental leave but also advocating for gender equality generally.
Summary provided by Courtney Andrews and Tana Pasipanodya, Graduate Consultants