Cloud computing reshaping the IT Industry
Ashley Porter of superannuation advisory firm Mclowd told an audience of fund management platform providers earlier this year he had bad news for them – their revenue models had been disrupted and were heading for extinction.
“I am here on behalf of your clients … I am here to disrupt you … much of what I want to say, you do not want to hear,” says Porter in his IO&C (Investments Operations and Custody) conference address, How zero marginal cost will shape business.
The so-called disruption is driven by consumers’ realisation that many of the financial products and services they have traditionally paid thousands of dollars in fees for are now free, thanks to cloud computing.
Porter says it is just a matter of time before superannuation fund members question why their providers are passing on the high costs of expensive software licences when cut-price and even free IT platforms are available.
“We are not talking about buying a mousetrap that is 20 per cent cheaper. We are talking about a mousetrap that is free,” Porter told The Australian Financial Review.
In future, fund managers will have to reduce their 100 basis point fees to 10 basis points if they want to survive in a world where consumers are waking up to the fact that the cost of managing assets has become negligible, he says.
Andrew Godfrey, Mercer financial services business leader, Pacific, agrees that costs linked to managing superannuation funds need to be cut.
“(We) are looking at how do we make super cheaper? We need to reduce the amount that it costs providers such as Mercer … while at the same time designing new user experiences using digital technology,” Godfrey says.
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He said Mercer was investigating how technology can generate genuine, straight-through processing initiated by fund members that would help pare back management fees.
“As an industry, when I think about administration of funds and the under-investment across service and technology, I see that we have created a product that is quite complex and difficult for the member to understand and navigate.”
Godfrey says Australian employers are demanding more from their super providers because their employees are demanding more.
“There has been a loss of faith with old-school super administration: it’s transaction-focused, not people-focused. It’s rigid and inflexible. It’s not geared towards growth and it lacks vision.”
He says the industry has to make it easier for customers to do business with their super fund “when they want to, how they want and in a way they want”, which is increasingly via smart phones.
“Providers need to utilise data to create a more meaningful understanding about the member so that they can provide them with the service they demand.
“The data needs to be more personalised to the individual member’s needs. They don’t want information that is not relevant to them, only the information that helps them make a decision suited to their personal circumstances, whether it be their life insurance needs, the level of contributions they need to make or what level of risk they are comfortable with.
“As an industry, we all have a fair way to go to deliver best-practice superannuation for the end member.”
However, peak body Association of Superannuation Funds of Australia insists that super funds have made great strides in engaging members recently.
“The member is now in the driver’s seat,” ASFA chief executive Pauline Vamos says, adding that funds are beginning to pay attention to members’ requirements.
“Responses to an ASFA survey confirmed that people don’t want to fill out multiple forms. They want pre-filled applications. They want to be able to wave their licence over their smartphone to sign up and transact,” she says.
Despite the IT challenges forced onto the industry by adoption of the Federal Government’s Superstream system, Vamos says most funds have vastly improved member experience.
Results from Canstar analysis are mixed on the topic of engagement.
While the financial data provider admits the “conversation has shifted from academic to customer-based research”, it also contends the industry has much modernising to do.
Canstar recently examined 67 superannuation products and found all of them allowed members to check their balance online.
The research found more than 90 per cent of funds allowed members to switch investment options online and check historical statements; 65 per cent allowed members to roll over other funds into a new fund online, 56 per cent did not require paperwork to join the fund; 62 per cent had a website optimised for mobile phones, but only 28 per cent had a mobile phone app.
However, Canstar’s superannuation national manager, Josh Callaghan, says consumers see the services available from their other financial product providers and expect similar levels of convenience when transacting within superannuation.
“In superannuation, there is a virtuous circle between education and expectations, which is creating an escalating consumer expectation that is only being met by a portion of the market,” Callaghan says.
“There has been an increased focus on providing new solutions to consumers such as robo-advice. However, little has been done to provide a truly unique proposition to consumers.”