The Pensions Authority are currently overseeing the reduction in DC pension scheme numbers from somewhere in the region of 60,000 DC schemes down to about 300 of only the very biggest schemes. While this satisfies the Authority’s objectives of reducing the number of individual trusts and improving the scheme governance, what about the members and their adviser? One of the big lessons that financial advisers in Australia learnt, from their shift to master trusts, was the importance of member communication. While scheme members will still be ring-fenced as having a common employer, they will now be members of a far greater collective, a vast mother-ship called a Master Trust, where the advisers’ can lose the attention of scheme members to the vast communications coming from the centre.
Under this new legislation, the trustee (we cynically say the Insurer), will have a firm mandate for strong employer and member communication. This is not a case the “make sure you pin the trustee report on the noticeboard” type communications of the past. They must strive for active management and as the Master Trust hosts employers with and without an adviser this active management will be year round and will not differentiate where the business has originated.
This is great for member communications and boosting member engagement but it causes an issue for advisers in that everything points back to the centre and the adviser’s brand gets diluted.
As master trusts complete with each other, their offering and marketing activities will ramp up to win the hearts and minds of new employers and new members. Self-service facilities for members will become increasing available, from risk profilers, fund selection tools to call centres and even online advice, further shifting the attention of the member from the adviser to the Master Trust provider.
Provision of advice
In the Australian market there was a divergence in member advice. Typically the average fund member started to take the generic advice from their superannuation fund, while the higher net worth clients went to an adviser for guidance. Only through the use of technology did advisers win back scheme members by demonstrating their ability to shift from the traditional advice model and their firm’s digital value proposition.
The death of group risk?
At the risk of sounding like a prophet of doom, in time there will most likely be a significant shift in the group risk market because of Master Trusts.
Group risk in Ireland is done on an opt-in basis, where by the adviser / client proposes to an insurer a level of coverage for their staff, which is then underwritten to assess the relative risk. The risk needs to be assessed as the skeptical folk in the actuarial department are afraid of what they call anti-selection, put simply, why is this employer seeking life cover now?…..is one of them sick?
Once every group scheme in the country is under the same Master Trust it is very easy for the insurer, under the recommendation of the trustee, to implement Default Insurance. This is where every member of the fund, regardless of age, occupation or even health status, is provided with default life cover of say 2 x salary.
This is an opt-out basis, meaning that the entire fund, potentially hundreds of thousands of members are covered all at once, no underwriting, no forms and no consent even needed. Of course covering so many people there will be a cohort of people that die but cover you can be sure that actuarialy the numbers are well crunched.
This is practically always recommended by trustees in Australian Master Trusts and even APRA, the Australian Regulator supports this a basic level of cover for every Australian. So default insurance is a convenient low cost solution for members and it is not difficult to see why the insurers love. Probably no so good for advisers as they don’t get paid for it and to make it worse, existing group risk plans can become redundant and are often no longer needed.
Whose brand are you building?
Once the insurers have their Master Trust contract finalised they will all offer member online access and mobile apps. These can be a great feature to offer members and to your employer clients but do exercise caution and consider the question, whose brand are you building?
Once members and clients are looking the mobile Apps for an insurer they become sticky, it can be hard to get them to switch. Going to hundreds of your scheme members asking them to delete one App and download another isn’t really an option. They become digitally connected.
Passing your clients to a provider’s technology prevents you from controlling the content and more important shifts your client’s eyes away from your brand.
Getting closer to members
A powerful communication link is created when the adviser has the facility communicate directly to a member’s mobile device. Uploading documents of interest and sending timely push notifications provides the member with the information they want, to be consumed at a time that suits them.
Winner of the 2021 Irish Pensions Awards, the Engage App is the only adviser branded facility on the market to help advisers win the communications battle for the hearts and minds of members.
Karl O Meara