Smaller Super Funds Outshine Giants in Member Trust and Service

For many years we have been told that bigger is better when it comes to superannuation funds.

It is meant to be simple industrial logic – bigger funds will be able to offer benefits of scale on both the investment and customer service sides that will reduce costs and improve performance.

The argument has been so strong that the entire superannuation industry is rapidly rationalising at a breakneck pace.

Two funds hog half of the inflows

The country’s two largest superannuation funds, AustralianSuper and Australian Retirement Trust, now account for more than half of all superannuation inflows and boast more than $655 billion in assets.

Between them, the next five biggest industry funds — UniSuper, Hostplus, Cbus, Rest and HESTA — have a little more than $700 billion in assets.

A recent report by KPMG said that superannuation funds will need to keep getting bigger through mergers, as the $4.2 trillion sector tackles rising costs and a raft of high-profile gaps in services to members that have led ASIC to take court action against some funds.

The report said funds were struggling with rising operating costs, an area in which larger funds should have an advantage due to their greater scale.

Fund members like the personal touch

However, what if the experience of members on the ground found that smaller funds are more trusted by their members because they have greater transparency and communication – both qualities the larger funds struggle with?

This was shown by the struggles that some larger firms including Cbus and AustralianSuper had with handling death benefits and claims for total and permanent disability insurance.

Smaller funds can produce more personalised and faster services, with members even able to contact the same person to help them by email or phone.

According to CoreData’s annual member engagement survey, small industry super funds are rated higher on trust, service, and value for money by their members.

Connections with smaller funds can be better

Rather than feeling like they are just a number, members of smaller funds can feel much more connected to their fund and enjoy personalised contact, greater speed, and much higher trust levels than larger funds, where members sometimes feel like they are just a number.

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

That may be a measure of unhappiness over returns and fees, or simply a feeling that the grass might be greener inside the bigger funds.

Given that smaller funds have better engagement with their members, it would seem a good idea for them to start reaching out with the message that bigger is not always better, along with some figures outlining solid long-term performance.