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Digital disruption meets retirement incomes focus

This is the fourth in a series of articles highlighting the leadership attributes needed to move the superannuation industry from its historical focus on accumulation to whole-of-life with an emphasis on retirement income provision.

There’s no shortage of leadership challenges for super industry executives – the dramatic Budget proposals are just the latest blip. But more fundamental secular changes are an even greater test. Two trends are now coalescing to create both a survival and a growth test: the increasing focus on retirement incomes in super and the digital disruption shaking every industry. I spoke with Chris Stevens, Founder of Digital Frontier Partners, on how these changes might come together.

Chris: My view is that technology is changing many of the basic premises we’ve had for running a business. Change is happening faster than leaders of organisations can predict and legislation can’t keep up. Customers’ expectations are driven by experience with global digitally-sophisticated industries. If businesses don’t adapt they’ll fail, but that’s also true for individuals. Previously successful executives can fall behind.

Jeremy: In our industry, there’s a monster demographic shift towards a pre-retired and retired population. And 62% of industry assets are owned by those over 50. But the industry so far seems ill-prepared for an ageing population, with, until recently, little focus on retirement incomes solutions. We’re going to see some funds and some leaders fall behind here, too.

Chris: In my travels, I see several archetypal executives:

  • those in complete denial about the magnitude of digital change, who just keep doing what got them to their executive position. They’re at the highest risk
  • those who realise the organisation has to change but are uncertain as to what they have to change … and so recognise they need help
  • those who realise they have to change their own way of managing and leading. They don’t have all the answers and are ready to source input from various places and collaborate.

Jeremy: If these archetypes hold true for the super industry, a shift is needed to take us to a retirement incomes focus. At one end of the spectrum there may be executives that haven’t recognised the lifeblood provided by ageing members or thought through the essentials of keeping them in the fund. At the other end, there are executives who are fully on-board and taking bold actions to change the way they think about their membership base with a whole-of-life focus.

Chris: We can think of three key areas of change: client expectations, what’s possible, and leadership requirements.

Client expectations

Most fundamentally, client expectations are changing rapidly. A business only exists if it provides value to a customer and it’s challenged when expectations of value are changing at a rapid clip and in unpredictable ways. Businesses often get into trouble in a ‘Wash, Rinse and Repeat’ cycle, where they’re focused on measurements which dictate their ongoing operating rhythm. Those measures may not be consistent with the changing attitudes and desires of the customer. The lesson is to keep focused on what’s important to the client – that’s your North Star.

Jeremy: In our industry, it’s obvious that client expectations are changing through the influence of global digital service standards. Phrases like ‘24*7,’ ‘instantaneous anywhere access,’ ‘mobile first,’ ‘make it easy,’ ‘it’s about me,’ ‘give me control,’ capture the spirit of the time and member expectations. The idea that these expectations only apply to Millennials is a myth. Over 50s and retirees are highly adept at digital channels and have high expectations of service. Keeping super members through to retirement and beyond requires a strong commitment to digital solutions.

What’s possible

Chris: Technology innovation has changed the boundaries of the possible. Digital tech and data availability have changed the personalisation and ease of access for doing business. If consumers aren’t getting personalised solutions, they’re moving on.

Great advances in using algorithms and in machine-learning will lead to reinvention of service possibilities. Structured and unstructured search mean that information can be tailored much better for individual needs. I recently visited Hilton Hotels in Nevada and was greeted by a robotic concierge, Connie, which checked me in and gave me tips on what I might do there. Chatbots are now widely discussed as ways to get personal assistance to clients.

Jeremy: Using technology to deliver personalisation is key for super funds. One-size-fit-all defaults just aren’t going to cut it for the planning and retirement phases. Members need and want help making better decisions about their futures, and the old ways of dishing up advice aren’t going to scale to the needs of an ageing population. We need to think of advice in ways that aren’t feasible in a human-only model. I’m not talking about the replacement of human advisers but expanding the reach of advice to a much greater population and supplementing human interactions.

Management and leadership

Chris: It’s one thing to identify current technology, but it’s quite another to lead a company or super fund into enduring success in the context of rapid change. This is the real leadership challenge.

Command and control is passe. Not that you don’t need the controls; there are parts of every business that need to be run for precise operating delivery. The new environment is also demanding an agile focus around the customer, to be genuinely client-centric. In a world of strong regulatory and compliance thinking, we often retreat back to our conventional KPIs and metrics. But you have to do both.

You can feel the cultural difference when you walk into meetings and the predominant conversation is about how this will impact the customer. “What will the customer think?” That’s much more powerful than a conversation about how we will improve a process.

Customer-centricity requires new skills. It’s now about infusing some of the ‘software’-type skills using data and programming to create better outcomes. Thinking agile. Design thinking.

Leaders can’t, or shouldn’t, do it all themselves. Changes around the tech eco-system, such as Software as a Service and cloud computing, mean that better, more reliable, cheaper solutions may be available from partners. And solution providers are filling all kinds of niche services with a degree of specialisation that Adam Smith could only have dreamed of. IP is at the end of every Google search and businesses that can provide this are creating disruption options for established players in all industries.

Executives and businesses have both a challenging and exciting world in front of them. As always, those who adapt and create winning propositions and teams will survive and prosper.

Jeremy: In our industry as much as in any other. Amen, brother.

 

Jeremy Duffield is Co-Founder of SuperEd. He was the Managing Director and Founder of Vanguard Investments Australia, and he retired as Chairman in 2010. Chris Stevens is the Founder of digital consultancy, Digital Frontier Partners.

 


 

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