By Craig Cummins, superannuation and asset management leader
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We live in extraordinary times. Leaders today across all major segments of Australia’s financial services industry are concurrently grappling with a range of significant and complex problems.
The superannuation industry is navigating its way through some of the most significant challenges ever faced. The industry is simultaneously dealing with the remediation of historical issues (or confirming they don’t exist), implementing what can only be described as transformational reforms, managing business as usual and realigning strategy to put more focus on members.
Right now, the industry is having to do all the things it was doing before – only faster, better, and to a much higher standard.
With so many priorities, there is a real risk that we may do a lot of hard work but fail to create the sustainable member-focused businesses required to deliver the right outcomes into the future.
So how can we ensure we retain the appropriate focus on the future, while also resolving the problems of the past? And, continue to deliver on our promises to present members?
It is evident that the industry has a genuine commitment to avoid repeating the mistakes of the past and rebuilding trust with members.
Of course, that’s easier said than done. The determination to make things better is important, but there are so many competing priorities demanding attention and investment. The only way forward is for superannuation leaders to recognise that:
Priorities to stay future focus driven
1. Recognise that superannuation will be a more competitive industry in the future
Relying on default arrangements and system growth won’t create a sustainable fund. We can all acknowledge that the industry has, to varying degrees, benefited from default arrangements and system growth. However, higher regulatory and community expectations, supported by reforms that focus on member outcomes and greater transparency, will drive greater competition in the sector and increased member engagement.
As regulatory, member and community expectations continue to evolve, and the industry consolidates, the bar will continue to rise. This will be supported by a range of regulatory reforms, including the legislative outcomes assessment, and a greater level of scrutiny facilitated by standardised reporting of fund performance (for example, through the various dashboards proposed by our regulators).
This means that funds will need to be more competitive – and to compete effectively will need to be crystal clear on purpose and the value created for members.
2. Be clear about purpose
Absolute clarity of purpose should inform every decision made - putting members at the centre of everything you do to realise better member outcomes.
To achieve this, trustees should be thinking about:
Importantly, it can be easy to confuse organisational interest with members’ interests. Determining what you do, what you don’t do and why it’s in members’ best interests, requires greater focus and discipline going forward.
3. Simplify your business (or keep it simple!)
To deliver on your purpose in a highly competitive market trustees need to keep business as simple as possible. It was evident that operational and product complexity was a contributor in some of the case studies examined by the Hayne Royal Commission.
But keeping things simple is hard to do, not just because it is technically challenging, but because it is also emotionally difficult. Simplification requires making disciplined choices, and making choices requires giving things up and making trade-offs.
We’ve already seen the start of this as trustees look to define their fund member outcomes and restructure operating models - and the benefits are very clear.
So where to start with the simplification challenge?
Success in these areas will result in a more sustainable fund equipped to compete and deliver better outcomes to members.
4. Unlock the power of people by understanding and transforming culture
Culture is the force that can drive organisations to success. After the Hayne Royal Commission’s criticisms of organisational culture, leaders may be tempted to view culture as a remedial issue. But culture has the potential to be so much more than that.
In other words, it can activate strategic agendas, inspire people and deliver on intent. But to unlock this, trustees need to rigorously and honestly understand their funds’ unique culture and its inherent strengths and risks, before outlining their organisation’s cultural expectations. Identifying and focusing on a ‘critical few’ behaviours—that align with the organisation’s strategy and cultural imperatives—will ensure focus and simplicity. Allowing the behaviours to spread organically through the organisation and empowering people to deliver outcomes that are in the best interests of both the organisation and their members.
Beyond these four key priorities there is still much more to do.
However, working together to make deliberate and intentional progress on industry issues and individual organisational capabilities will determine the success and community standing of the superannuation industry for the years to come.
With simplification and focus becoming the mantra for our sector, we have the opportunity to create lasting change. Those who find ways to harness this opportunity will build the great funds of the future.
All of the above is easier said than done, but this period of reform and change gives us a prime opportunity to look beyond the immediate challenges and to think big about aspirations for the years ahead.
Superannuation and Asset Management Leader, PwC Australia
Tel: +61 2 8266 7937
Director, PwC Australia
Tel: +61 (2) 8266 8660