Technological grunt - The secret to fund trustee success

In Australia’s increasingly competitive superannuation market, fund trustees are becoming more and more focused on standing out from their rivals. Tailoring fund services to members’ specific needs seems the path to this distinction. And the vehicle to obtaining this goal, according to Mike Turner, general manager for Marketing and Business at Pillar Administration, is good administration with solid technological grunt behind it.

And if administration is the key to a superannuation fund’s success, it is little wonder that funds have recently exercised particular caution when their administration contracts have once again come up for tender. It is an important time for fund trustees, and even more important for administrators. They, after all, are seeking to do well with not just one contract but many.

“Most, if not all, superannuation funds have had some tender activity in the past 18 months,” says Frank Gullone, managing director of SuperPartners.

“SuperPartners has a number of tenders on the table at the moment, as well as some that we have already won. We are currently involved in the tender for Legal Super, defending the contract we previously held with AGEST and have been successful in obtaining the contracts for both the ARF and Virgin Money, “ Gullone said.

Pillar Administration has also seen a lot of tender activity in recent months, according to Turner. Many of the contracts sought by SuperPartners hold just as much interest for names such as Pillar, Australian Administration Services (AAS) and CitiStreet — all of the big players in the administration market.

By and large, the strategic model for administrators seems to be the same. That is, the big clients with high member numbers are given top priority and are hotly contested by all, while best efforts are made to ensure that middle tier and smaller clients remain content with their current administration services.

Of course, not all administration providers are oriented towards high volume clients. Providers such as Financial Synergy have carved for themselves a niche market of specialisation which, in this case, refers to funds with defined benefits schemes.

“We have around 15 tenders out at the moments and around ten of those are corporate super funds,” says Financial Synergy’s managing director, David Orford. “Financial Synergy’s main clients tend to be corporate funds. They will continue to be our focus as we offer a lower cost service to fund trustees.”

It seems despite the number of administration contracts that have come up for tender in the last 12 to 18 months, there has been remarkably little change in terms of which administrators are handling which superannuation funds.

The obvious question presents itself. Why?

Is it because fund trustees in general are happy with their current administrator and their offerings? Or is the prospect of changing administration providers simply too time-consuming, too costly and too arduous to contemplate?

When it comes to changing administrators, Pillar’s Mike Turner says that service levels and dissatisfaction with them need to reach a critically low point for trustees to consider changing their administration providers.

“Changing administrators is one of the hardest decisions for a fund trustee to come to,” he said. “For example, ARF with around 600,000 members was a big move to contemplate. Every member’s details, every member’s contribution, every member’s fees had to be accounted for. It comprised a lot of work.”

However, while Turner admits that an administration change is undoubtedly difficult on a number of levels, he believes that trustees are often blinded by the enormity of the task. He stresses that there have been a number of large moves in recent years and that the process achievable.

Offering another perspective, Stuart Korchinski, chief executive officer of AAS, feels that each superannuation fund’s decision with regard to moving across administration providers or staying put is unique.

“All funds have particular circumstances influencing their decisions. They may have potential mergers in mind, may be taking into account their history of service or something else again,” he said. “But when all is said and done, funds are looking at the underlying capabilities of an administrator to provide bigger and better services into the future.”

Even overseas benchmarking has occurred within the administration marketplace, with some super funds making comparisons between their Australian administrators and those to be found in the United Kingdom and the United States.

Opinions on this exercise, however, are divided.

SuperPartners’ Frank Gullone believes the Australian superannuation environment to be simply too different with far more complex legislative requirements for the comparison to be valid.

Alternatively, Korchinski’s opinion is that with the advent of choice of fund, the similarities between the superannuation market in Australia and that found in the United States are growing.

Agreement between the two can be reached when it comes to the ingredients for successful administration provision.

Gullone believes that the key areas for administrators are people and technology.

“Specifically, attracting and then retaining the right people is most important,” he said.

“After all, this is a people-based business. Technology is important, but in the end it is more important to have the right people with the right knowledge and the right skills.”

Korchinski agrees. He states that successful administration is all about scale and communicating effectively and believes Telstra’s recent acquisition of AAS to be a large part of how they are improving these areas.

“At AAS we have seen an increase in the level of interest in email and short message service technology. Administrators who are able to handle possible changes of this nature have a definite advantage,” he said.

At base, the reality acknowledged by industry experts is that administration within Australia can currently be termed a tight market. But as Turner said: “The challenge is to provide super fund trustees with reasons; reasons to draw them away from their current providers or reasons to keep their administration with you.”