The majority of consumers believe it is now more important for their super funds to provide financial advice after the market declines, according to a new report, but only a third are willing to pay for it.
A newly published KPMG survey of 1,500 people has compared consumer satisfaction across advice, insurance and super in light of COVID-19.
Superannuation and pension satisfaction is faring lower than insurance and financial advice according to the survey, which has reported the segment had the lowest proportion of highly satisfied customers at 20 per cent.
However, 59 per cent of members were somewhat satisfied with their provider.
The majority of customers do not intend to switch providers in the next 12 months, with 12 per cent of survey respondents saying they were very likely to change in contrast to 64 per cent who said not very likely or at all likely.
The most cited reason to stay was “no reason to change” for 23 per cent of consumers, while 22 per cent said they were happy with their provider and 13 per cent said they were happy with current performance. The fourth top reason indicated a feeling of being locked in, saying it is too much effort.
But customers of retail funds were more likely to make the change, compared with industry and other funds. Close to one-quarter (23 per cent) said they were quite or very likely, compared to only 9 per cent of industry super fund members.
More than half of consumers whose jobs were impacted by COVID-19 had reassessed their financial position and their super products, with their likelihood to switch funds higher at 25 per cent versus the average 12 per cent.
Those seeking to switch typically cited a search for better value.
The majority of consumers (59 per cent) agreed it is more important for super funds to provide them with financial advice, with 36 per cent expecting funds to provide advice services through the COVID period.
Meanwhile one-fifth (21 per cent) expected fees to be reduced during the pandemic and 14 per cent expected improved contact and communication.
Half of the respondents said they are now more aware of their investment balance and are realising the importance of receiving advice to manage how their super is being invested. Meanwhile, nearly two out of five respondents said they need to better manage risk and support their future savings.
Linda Elkins, head of asset and wealth management at KPMG said super funds need to increase engagement with members, with the segment being less frequent in contact than other financial services areas.
“Nearly two-thirds expected to be able to deal with their super provider wholly digitally and this is an area which many funds are addressing, but they need to focus on operational improvements even more to meet expectation,” Ms Elkins said.
“A majority said financial advice from their provider was important, but only a third were willing to pay for it, so this leaves funds in a difficult position at a time when there are liquidity challenges, falling investment returns and early access withdrawals.
“These pressures, combined with heavier regulatory demands, will increase the likelihood of more fund mergers to achieve greater scale.”
“The mandate for super and pension funds is to increase engagement with members through targeted advice and education-based services,” KPMG’s report stated.
The report has recommended super funds increase member engagement and to support pre-retirees with revised planning.
It has also stated funds will need to develop a differentiated and diversified proposition for future member retention, as well as prepare for an increase in demand for income certain products.
Financial services products have become increasingly digital in the pandemic era, with almost 80 per cent of the survey respondents preferring online access.
Consumers are also demanding better value for money from providers – with nearly two-fifths (42 per cent) reporting financial impacts due to COVID-19 and 68 per cent saying they had reduced both their overall and discretionary spend.
Around a third (34 per cent) cited mental health impacts, while 25 per cent said their physical health and wellbeing were affected.
Tim Thomas, partner, KPMG Strategy said the impacts of COVID-19 will have far-reaching consequences on consumer spending, attitudes and sentiment to products and services.
“It finds clear signs among consumers of a refusal to return to the old pre-COVID-19 ways of interacting with their providers,” Mr Thomas said.
“There is an expectation in the COVID-19 era that businesses will offer greater value for [money] and be more flexible in the services and products that they offer. Providers need to be aware that even those whose jobs [have] not been directly impacted are reducing their overall and discretionary expenditure, and they must respond to these new circumstances and demands.”
He pointed to super fund members asking for advice on alternative options.
“By meeting these new expectations businesses can build trust among consumers, which is evolving as a concept and now has to meet a ‘will you put my needs first?’ test,” Mr Thomas said.
“Trust is also crucial in the provision of digital services – a sizeable number of consumers are not willing to give sufficient personal data which would allow providers to maximise their offerings.
“And while nearly [two-thirds] of consumers now believe they should be able to deal with providers solely through digital channels, an older minority still need to have their trust earned and convinced of the benefits.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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