Super disruption: "the ice cube on the tip of the iceberg."

Thursday 27th July 2017

Industry Disruption

Simran Gambhir, director of tech firm Ganemo Group, recently transferred his super into one of the new millennial-focused funds, and found it a remarkably easy and enlightening process. Disgruntled with the processes of his incumbent, long-established fund he reflects on the changing face of super and outlines some ideas for how the old guard could and should be preparing for the 'super-invaders'; before it's too late.

By Simran Gambhir

Recently I wrote about the inevitable disruption coming to Australia’s $2.3 trillion super industry, which has largely failed to innovate or connect with its millions of stakeholders for decades.

That disruption has started: from within the industry and without.

The Australian Prudential Regulation Authority (APRA) has decided the industry is ripe for a shake up, and is introducing new requirements. One of these is getting super funds to make it easier for people to opt out of insurance policies. This has been a massive, unquestioned cash cow up to now. Its removal is going to represent enormous disruption for the incumbent players.

Another change that APRA is introducing is requiring super funds to hold annual member meetings. Kelly O'Dwyer, the Federal Minister for Revenue and Financial Services, says this will make funds "more accountable to consumers", consistent with how public companies have to hold shareholder AGMs.

Easier said than done. How do you engage with several million members? Technology can obviously play a key role as it's a more immediate and affordable way to communicate with members on a regular basis. That's if super funds have the email addresses of all their members, of course. Given how many people start with super via an employer-picked or default fund, the funds may not have their full and current contact details.

New players will obviously have this communication capacity from the start. They all use a fully digital sign-up process. I recently tried using the new Grow Super fund, and it took me less than five minutes to transfer all my super there, including downloading the app.

Four weeks later I finally received a letter (snail mail) from my previous retail super fund - a traditional, older generation establishment. I hadn't heard from them since my statement last year. It took them an entire month to realise they had lost me, and to manage to communicate with me.

Many incumbents will face the wrath from people like me who will only find out more about what’s actually been happening in the funds at the AGM. When I received my “exit letter” after 24 years with the fund, and saw that they had charged me for insurances I had no idea about I was livid. To top that off they charged me an “exit fee” to leave the fund, and the net return on my entire savings was 1.46% for the whole year - banks give better returns on savings than that and like most people, my fund probably didn’t even return enough to keep up with inflation. That’s not to say all funds are that bad -- some probably returned reasonable amounts, but the days of the “don’t care attitude” are coming to an end.

Innovation in the super industry is coming in different waves and forms, including broadcast digital channels (such as newsletters) and interactive channels as Grow has done with its state-of-the-art mobile app.

Four weeks later I finally received a letter (snail mail) from my previous super fund - a traditional, older generation took them an entire month to realise they had lost me.

A number of startups I know are looking at creating funds with such interactive channels from the get go. Interactivity means engagement, which means less surprises at the mandated AGMs. And as we all know too well, at any AGM it's the frustrated and alienated attendees who are most vocal.

These super invaders are working at light speed vs the snail's pace of old super funds. They've changed the entire game - you can access them with the push of a button. Digital makes the cost of customer acquisition and onboarding negligible. It's all automated and instant. And customers are flocking to them.

Grow Super has targets of reaching $150 million in funds under management by the end of the year; they are already a third of the way there and at this rate, they will even exceed their own expectations to hit $1 billion by end-2018. A startup is ambitious by nature, but beating expectations highlights just how much they can get people to care and mobilise them towards change. This is still tiny in terms of market potential given the size of Australia's super industry. Their growth potential is immense: most new super funds could easily target 500% annual growth and cumulative, within a few short years, become one of the largest funds around.

Another super startup that's close to release is Zuper, also with very ambitious plans. These funds are just the beginning of an explosive wave of new entrants. The rate of change is accelerating, and the rate of decline for established funds as a result will be exponential.

Most incumbent funds are fast approaching the event horizon of a black hole… their demise is only going to accelerate. They are at a stage the newspaper industry was about 15 years ago; only this time around, it won’t take that long for things to change.

If they are to survive, they need to quickly embrace digital channels. That will be a fantastic start, but then they also need to innovate and constantly improve their product offerings. This includes looking at how they can engage with customers in a true relational and personal way, while exploring technological trends on the horizon such as machine learning, artificial intelligence and blockchain. If they do that, not only will they survive, they will thrive as they still (for a little while longer) have some brand value.

A year from now, it will be a different ballgame altogether as there will be a dozen new entrants in the market, entrants the incumbents will not be able to deal with unless they prepare for that NOW!

The disruption we're seeing isn't even the tip of the iceberg; but the ice cube on the tip of the iceberg.

Simran Gambhir is the founder of technology and software solutions provider Ganemo Group. He was previously CTO for Flybuys and News Corp’s digital arm.

Back to Insights