(Pictured: Anthony Viel)
Anthony Viel, a partner at Deloitte, has a challenging suggestion for big super funds: he says that they risk becoming “the back-office function” for someone else who “owns the relationship” with their members.
Big, mainly not-for-profit, super funds have a blind spot, he believes, when they look at their competitive landscape. Their real long-term competitors are not other super funds, they are customer-centric organisations including the big four banks and the big retailers.
Viel, an actuary by training, is an analytics expert who was instrumental in the foundation and build of Deloitte’s Analytics in Australia and globally to a $2bn services business. In his current role he oversees Deloitte’s Data Agenda, which includes all of Deloitte’s services in and around the strategy, capture, management and use of Data. In this area Deloitte services industries including Public Sector, Consumer Business, Financial Services and Telecommunications across the domains of customer, workforce, supply chain, risk and finance.
Russell Mason, a consulting partner at Deloitte who is well known to big super funds after a previous long career at Mercer, says it is not widely known, for instance, that some of the major retail players have applied for banking licences. In the future, it will be more than groceries and liquor, alongside the recent additions of petrol and car insurance, that those retail giants are selling to their customers.
Viel and Mason’s concern is that super funds are being left in the wake of the banks and retailers in terms of gathering and then utilising information to know and service their members better.
The funds tend to see data analytics solutions and subsequent better content and communications with their members as being expensive and time consuming. Yet, at the same time, those funds appear happy to spend many millions more on the “shot gun” marketing approach of television advertising and sporting sponsorships.
Have you ever wondered, Viel asks, why checkout staff seem keen for you to use a “fly buys” card? It’s so the company can get to know more about you to serve you better and proactively. By analyzing customers’ grocery purchasing patterns, which the company has done, it can for instance better price its car insurance offering for individuals.
In America it has been shown, he says, that a customer who declares that they have a dog by buying dog food on a regular basis, believe it or not, is less likely to claim on their car insurance. Think about it; it makes sense.
We know from psychological studies that dog ownership can actually extend people’s lives – more exercise, a friendly greeting whenever you walk through the door, etc. On the other hand, if you’re buying lots of alcohol and cigarettes at the local retailer each week, you probably have a different sort of lifestyle and therefore different risk profile.
Mason believes that a contributing factor to the group insurance premium crisis, which all big super funds are facing, is that their membership data and utilisation is relatively poor leading to less precise risk assessment and pricing. Cross-subsidisation is rife. There is also the growing annoyance at ‘selecting against a fund’ by some departing members when they leave just enough of their money in an industry fund to retain the competitively priced insurance.
Viel says the customer as a “category of one” is what the big players want to get to and the proliferation of data, advanced analytics and rapid improvements in technology is allowing them to do so. “The game is not going to be just about having a better product,” he says. “It will be about knowing your customer better and then using that knowledge.”
He also believes that super funds cannot outsource the responsibility of knowing their members to their administrator. The administrator is the back-office function for a fund and is not charged with knowing the member. If the fund does not take that responsibility seriously, then it will likely end up as simply a non-value adding overhead.
Deloitte offers a range of Data and Customer Strategy services. Other firms, including some asset consultants which are also part of broader corporate advisory companies (such as Towers Watson and Mercer) also provide both advice and outsourced implementation.
But it is surprising what valuable information you can get for not much money, or even for free. Viel says, for instance, if you tell him the minimum information which a super fund will have about a member – name, age, sex and street address, along with contributions history –he can immediately build a profile to calculate that member’s probable net worth, their spending habits, their preferences and networks and their likely financial services needs into the future.
“If you don’t want to spend the money required on the technology, and software as capital expenditure, there are many options to make it an operational expense by renting cloud storage, computer power or the entire packaged service. I can guarantee you that this spend will more than pay for itself in less than 12 months,” he says. “And this will of course be very compelling as a business case when you consider the cost of not doing it.”
Mason says that, for super funds, this is about keeping their members for longer, providing them with the relevant services they want and, if the fund wants, also providing them with additional services into the future.
The big advantage that not-for-profit super funds have over their new competitors and other financial services providers, is that their members are more likely to trust their honesty, if not their competence. They are not capitalising on that trust as well as they could, in the interests of their members.