Super funds need to engage members with a digital advice solution as competition ramps up across the sector, according to Midwinter’s Chief Executive Officer Steve Davison.
The number of Australians who have or will soon have access to digital advice through their super fund and Midwinter financial advice software now stands at almost three million.
That figure has almost doubled since January 2020 as super funds have focused on boosting member engagement and retention in the wake of new regulation.
Yet many funds are yet to respond with a digital advice solution despite rapid changes across the industry. They risk being left behind as record merger activity quickly reshapes the sector.
Digital advice becomes imperative
Many smaller funds or underperformers are merging with larger funds, which is creating newfound scale benefits in the wake of the Your Future, Your Super (YFYS) regulation.
To be competitive, these funds need to find new ways to engage their hundreds of thousands of members at scale.
If these members are not engaged, they may switch to another fund or make poor investment decisions. For example, a significant number of members switched to more conservative investment options when the COVID-19 downturn struck in early-2020 – they then missed out on the quick rebound.
Digital solutions, which can deliver quality advice in a scalable fashion, are a key part of the solution, helping improve member personalisation and maximising their retirement income.
Consumers have become accustomed to seamless digital experiences and are increasingly demanding them.
For example, more than three-quarters (77%) of Australians aged 65 and over were using online banking at June 2020 compared to 59% just three years earlier, according to ACMA.
The ability of consumers to extract even more value from digital services is also increasing as Consumer Data Right legislation gives Australians the right to share their data between service providers to find the best service.
It already applies to banking and is expected to eventually include super, providing another prompt for funds to increase member engagement.
Watch: Midwinter Financial Advice Software for Super Funds
Roadblocks to digital advice removed
Super funds are in a strong position to offer digital advice services, given people want solutions from the major organisations they already know and trust. But digital solutions must be cost-effective, compelling, and engaging.
Some funds have been put off by past digital transformation projects, which have taken a huge amount of time. That is no longer the case with digital advice. What can be achieved through advice software as a service is significant given advances in technology.
Open APIs make integration with existing ecosystems simple. Digital advice can be tied to the registry making straight through processing of advice a reality. Scalable and repeatable digital advice services create operating model efficiencies.
Digital advice can also ensure that personal advice remains fully compliant – the technology takes members along a pre-determined advice path and a Statement of Advice is automatically generated.
This technology forms a platform for all advice – it powers digital advice, online calculators, and the platforms used by in-person advisers. This ensures the same underlying quality, whether the advice is intra-fund or holistic.
Digital advice is no longer an either/or proposition working against in-person advisers. Digital advice can serve as a gateway to an in-person adviser when the time is right – when they need more advice or approaching retirement. A US Vanguard study recently found that 88% of digital-advised clients said they would be willing or extremely willing to work with a human adviser in the future.
Digital advice acknowledges that funds can’t possibly serve every member in person and not every member can afford the higher cost of a full financial plan.
Some member cohorts, such as Millennials, may prefer to interact through digital channels rather than in-person. This is crucial for the future growth of funds given younger members are often the least engaged with their super.
Digital advice is becoming a standard component of an increasing number of super fund services. It can boost engagement and member retention, while improving the retirement outcomes for Australians.
 The number of members reached through Midwinter digital advice solutions has risen from 1.61 million at January 2020 to 2.97 million at March 2022.
 The Future of Superannuation | J.P. Morgan Australia. (2022, April 07). Retrieved from https://www.jpmorgan.com/solutions/cib/securities-services/future-of-superannuation-report
 Box C: What Did 2020 Reveal About Liquidity Challenges Facing Superannuation Funds? | Financial Stability Review – April 2021. (2021, April 08). Retrieved from https://www.rba.gov.au/publications/fsr/2021/apr/box-c-what-did-2020-reveal-about-liquidity-challenges-facing-superannuation-funds.html
 The digital lives of younger and older Australians | ACMA. (2022, April 07). Retrieved from https://www.acma.gov.au/publications/2021-05/report/digital-lives-younger-and-older-australians
 Robo or human advice? Investors want both in one place. (2022, April 07). Retrieved from https://advisors.vanguard.com/insights/article/roboorhumanadviceinvestorswantbothinone