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The recent market turmoil and uncertainty will see many, if not most superannuation fund members opening their statements this year and wondering where their retirement savings have gone.
In the wake of the sub-prime crisis and the global credit crunch super funds are expected to post negative returns on member’s retirement savings.
For many of us superannuation is an afterthought, a number on a payslip that our employer deals with - that is, until we get our annual statement.
This year more than any other since the introduction of Super Choice the relationships that our superannuation funds have with us will determine what happens when we open that envelope.
Branding agency evolution media recently announced a deal with Australia’s leading superannuation fund measurement and ratings body, SuperRatings to assess the success of superannuation funds in using brand to drive fund membership and engagement within their member bases.
The survey, which uses data collected from super funds, their members and the general public, will give super fund trustees and marketing managers a real insight into the way their fund is perceived by members, and a good indication of the effectiveness of their marketing strategies.
With the looming spectre of negative returns, brand loyalty among fund members has never been more important.
The ability to measure member loyalty is sure to pay off for funds that take heed of the results of the research.
Superannuation is a trillion dollar industry, yet still has consumer brands in their infancy.
Some funds are already pulling ahead of their competition, creating strong messaging and consumer sentiment with their investment in brand.
Industry funds in particular have made huge investments in brand advertising.
From the early television commercials with former reserve bank head Bernie Fraser as spokesman, to the current series of ads with John Wood’s voice over promising “a lifetime of difference,” industry funds have developed a strong brand message of long term performance and low fees, with the funds being run for the benefit of their members.
A stand out brand among retail super providers is ING, establishing a strong brand message with advertising campaigns featuring comedian Billy Connolly.
AMP have recently appealed to the public with their “Super Simulator” campaign combining TV advertising with a comprehensive digital campaign
But it’s not just the funds with big mainstream advertising budgets that will fare better than others in volatile times.
Funds with high levels of member engagement and loyalty are well placed to weather what could well be a rocky period for the super industry.
Superannuation fund managers and their marketing teams should be asking themselves a few serious questions.
When volatile markets take fund performance out of the equation, how do members decide what to do with their investments?
What makes a member loyal to their fund?
How should super funds engage with their members to reassure them of the long term nature of their investment?
And, why would a member change funds?
These are all questions set to challenge super fund trustees over the next twelve months.
Funds must recognise that a focus on branding, and member engagement is just as important, perhaps more important than the performance of the fund itself.
The real challenge for all super funds in the coming year will be deciding how to position their brand in the first real test of member loyalty since the introduction of choice of fund.
For financial planners the challenges will be a little different.
Advising investors on how to manage their retirement savings will become more difficult.
The choice between good returns and better returns is likely to be replaced with the decision between bad returns and the not so bad.
Financial Planners are seeing more educated and concerned consumers, looking for a superannuation solution that suits their needs, and a fund that keeps them informed and engaged about how their investments are performing.
“There are a few big issues that funds will have to deal with this year,” explains Sam Henderson, Principal and Senior Financial Advisor at investment and retirement planning specialists Henderson Maxwell, “particularly for those fund members that took advantage of last year’s changes to super, and made substantial additional contributions to their fund.”
“It will be important that funds offer value-adds to their members, like financial advice, to offset the real losses many people will experience this year.”
“The industry funds in particular might struggle to keep some members in light of the poor performance of the market because they don’t offer the extra services that some of the retail funds do,” he says.
“I can see that many people will also give self managed super funds some serious thought.
“A lot of people will be thinking ‘If my fund can manage to lose me that much, I might as well give it a go for myself,’” Henderson says.
Fund trustees should not expect that their members are going to stay put.
Superannuation clearinghouse SuperChoice reports 12.2 per cent of Australians are not in their employer’s default fund.
A significant proportion of those employees have made a conscious and deliberate decision about which super fund they belong to.
SuperChoice also report that approximately four per cent of Australians have switched funds in the last year, up from two per cent when choice of fund was introduced three years ago.
So will the red ink on our annual statements spur on a further lift in the number of Australians changing funds, and is there upside to what looks like a grim year for the superannuation industry?
There is no doubt that as members open their annual statements, negative returns will give superannuation and retirement saving a starring role in dinner table, barbecue and workplace conversations around the country.
Good brands already know their members and can tailor their messages specifically to their needs.
Strong brands are confident that their members are informed and will be alert but not alarmed when they check their super balance.
Effective brands have fund members who already know what’s going on with their savings and won’t suffer envelope-shock when they get their paper statement.
For those brands, being a part of those dinner party and barbecue conversation could see new membership flow their way as active engaged members act as advocates for their funds.
For the funds without a strong brand message, there could be tougher times ahead, with the risk of membership drift a very real possibility.
The opportunity then is for super fund trustees and marketing managers to increase their communication with members - to educate, allay fears and to reassure members about their investments.
This may seem counter intuitive - the defensive position of circling the financial wagons and cutting spending on all but the essentials is probably not the right one to take.
Surely funds should be increasing their member engagement and retention activity, building on existing relationships and proving that superannuation should be front of mind for their members, not relegated to the too-hard basket.
When members understand what their super is doing, and that it is a long term investment, member loyalty is greater than if they are not engaged in the process.
“In a climate where investment returns are diminishing, and where super choice has made competition between funds fierce, it has never before been more important for a marketer to be able to prove that their retention and acquisition strategies are working” says Jeff Bresnahan, managing director of SuperRatings.
“Fund membership is actually slowing, and in some cases going backwards. Funds need to look much closer at their marketing.
“The SuperBrands survey initiative brings the superannuation industry into a new phase, a new phase for marketing managers, and a new ability for boards to actually understand better where their money is going,” says Bresnehan.
At a glance
- Branding and communication are more important than ever for super funds
- Super fund managers might face member drift in the wake of poor returns
- Consumer brands in superannuation are still in their infancy
- Planners are seeing better educated and demanding consumers
- Add-on products and extra services should help retain fund members
Vanessa Stoykov is CEO of evolution media, and Antony Perring is evolution’s Head of Content. Visit http://www.evolutionmedia.com.au for more information on the SuperBrands project.
This article appeared in Wealth section of The Australian, Wednesday, 18 June, 2008.