By Zein El Hassan, Partner

Member-centric research is something that ASIC and APRA are encouraging super fund trustees to consider in the formulation and review of their Retirement Income Strategies in Report 784 Pulse check on retirement income covenant implementation (Pulse check).

Well, here’s a bit of member feedback from retirees that doesn’t require much research. Many of our parents use their mobile phones to message and talk to their family around the world, and many do so in different languages. They watch YouTube videos on their phones and on their smart TVs, including in different languages. I know my mum does her shopping online and pays her bills online using her banking app.  I’m sure she’s not alone in doing so.

Assumptions about the use of mobile devices, apps, embedded finance as well as calculators and comparison tools by those who are approaching or in retirement may need to be retested because of their prolific use in their daily lives.

Our hesitation as super fund trustees to use digital channels for education, guidance and assistance, including digital financial advice for retirement planning, and in retirement, may also need to be challenged.

The Pulse check by the Regulators outlines some of the challenges facing super fund trustees in grappling with the uncertainty relating to the second tranche of the proposed financial advice law reforms under the Government’s Delivering Better Financial Outcomes reform program (Tranche 2 Reforms).

I share those concerns but more in terms of whether the Government will be able to deliver on that reform program because of the difficulty in balancing the different competing interests that need to be managed to bring those law reforms to life.

However, those law reforms should not hold up the effective implementation of retirement income strategies, including the use of digital channels and tools to assist retired and retiring members make better decisions about how to meet their retirement needs.

What’s more, super trustees don’t have the option to wait.  The Regulators are expecting trustees to act now and warning of enforcement action for those that don’t.

And, there’s a very good reason why the Regulators are beating their drums. They are warning super fund trustees about the 6 million Australians who are about to retire, which will increase by 50% over the next 10 years; and there will never be enough financial advisers to assist those retirees.

What we need is scalable and affordable assistance provided by the super funds.  The Government and the Regulators are singing the same song on this one.  Hence, the imposition of the retirement income covenant on super fund trustees; and the Tranche 2 Reforms are mainly directed at better facilitating the provision of financial advice by super funds.

The biggest opportunity to deliver that scalable and affordable assistance is to digitise intrafund advice. That is, for super funds to provide ongoing access to limited personal financial advice on a collectively charged basis on a list of single-issue retirement-related topics.

This can enable super fund trustees to offer personalised retirement solutions using a “cohort of one” assistance strategy.  It’s becoming a popular tag line by some of the larger funds in the market.

Access to digital intrafund advice can be supported and encouraged by education, guidance and nudges about retirement income needs at different life stages in retirement.  These “educational nudges” should encourage members to use the intrafund advice tools to help them decide how they should plan for their retirement having regard to their personal circumstances or better use their super in retirement having regard to their actual needs in retirement.

Some of the benefits of a “cohort of one” assistance strategy is that member cohorts and data collection initiatives can become more focused and targeted.  Cohorts can focus on member needs at different life stages in terms of pre-retirement planning, mobility (aka travel), health care and age care.  Data collection beyond a member’s interest in the fund can be collected through digital advice tools, projectors and calculators.

As this technology is scalable across your membership, it also makes it more affordable on a per member basis.  And it can be accessible at their fingertips through mobile devices and apps.

In terms of both capital expenditure and operating costs, digital intrafund advice is a low-cost alternative to human-intensive advice support services.  These digital advice modules are available as software solutions from third-party fintech providers. They can be incorporated into existing tech-enabled call centre operations to create hybrid personal financial advice offerings that provide a scalable and affordable solution for your retiring and retired members.

And, it’s possible to do this under the current legal framework. Some of these tools are already in market and many more are being developed to provide the assistance to support your members make better decisions in retirement.

However, it takes courage and conviction to introduce new technology and move away from legacy thinking and service offerings. That’s where the Board and senior management come into the frame.

Between the Board and senior management lies the struggle and tussle of setting the super fund’s ambition, its courage, and its conviction.  Most of which finds its way into strategic objectives, risk appetite and financial budgets.

The advice reforms and the emerging technology provide an opportunity to be bold, do things differently and break away from legacy models.

The responsibility sits on the shoulders of both the Board and senior management. But the steer needs to come from the Board.  The Board needs to “open the door” to innovation and give management the licence to be bold and courageous so that management can walk through it with confidence and conviction.

There are 6 million members out there looking to super fund trustees (and advisers) to help them plan for their retirement and live a better life in retirement. The Regulators and the Government are asking super fund trustees to accelerate their plans to help them.  It’s time to be bold and the solution is at hand.  Go digital in retirement.