Small industry super funds beat giants on trust, service, value

Small industry super funds lead on trust, service, and value for money, according to CoreData's annual member engagement survey.

CoreData research consultant Alana Devitt told Financial Standard that members' trust in small industry funds is built through transparency and communication, which bigger funds "don't do very well."

Devitt noted that ASIC's crackdown on larger funds like Cbus, which was sued for allegedly failing to act honestly and fairly in handling death benefit and total and permanent disability insurance claims, and AustralianSuper, for similar issues, clearly illustrate this.

"The journey between small funds and their members is a lot shorter. A lot of the time, members of small funds can just email somebody they've recently spoken to at the fund," Devitt said.

She said the response they get from the smaller funds is "super quick," particularly those that have insourced their communications.

"They're the ones that do very well, because members know they can pick up the phone at any time or send an email if they're busy, and they'll get a response back," she said.

"It helps members feel like they're going to be looked after whenever they need."

That, she added, is what allows smaller funds to command much higher trust levels than larger funds, where members sometimes feel like they're just a number.

Small industry fund members, nevertheless, reported some of the highest levels of switching intent, with 29% considering a move to another super fund.

While a complete lack of trust is the most powerful driver of switching intentions, evidently, factors beyond that, particularly unhappiness with returns and fees, also drive decisions.

"That's where small [industry] funds are vulnerable. Even though they have really high trust, really good service levels and satisfaction, they still have some of the highest consideration for switching. It's almost like the grass is always greener on the other side," Devitt said.

To counter this switching risk, small industry funds need to reframe their communications, she said, emphasising that "big doesn't necessarily mean best," even if that's been perpetuated by a narrative that larger industry funds dish out better outcomes.

She said an opportunity for small industry funds lies in reassuring members who are curious about other options by addressing any doubts around their performance.

The research also found that small super funds, across both industry and retail segments, had higher engagement, with their communications more likely to be read.

Disengaged members pointed to a lack of interest and boring content as the main reasons they don't read communications from their fund.

However, she noted that some large funds like UniSuper, with its in-house production studio, have done "really well" by pushing relevant communications that manage to rouse even the members who tend to tune out.

Regardless, "it's a hard war to win," she said, as ultimately, people don't usually engage with their superannuation until they hit certain age milestones, particularly around 40, when perhaps their children are heading to university, or another life event occurs.

And its once members start to eyeball their fund, they're most tempted to jump ship.

"The funds that are doing the job well, they're the ones catching members at that point - understanding the triggers of when a member might have a life-stage..." she said.