In the first of its kind research into customer service standards in superannuation call centres, the service provided was found to be inconsistent, unclear and often fell short of even basic expectations.

Not one single super fund performed well and two even struggled to answer the phone at all.

To discuss all this and more, we're joined on that super show by Xavier o', Halloran, the chief executive of Super Consumers Australia, a consumer advocacy group campaigning on behalf of consumers for better superannuation outcomes.

Let's rol welcome to that super show,.

The podcast where we talk about all.

Things super from the inside.

I'm Neil Benson, Chief Product Officer at Chandler cx.

And I'm Sarah Penn, CEO of Mayflower Consulting.

Each week we unpack what's changing in the industry, what funds are wrestling with and how tech and regulation are shaping the landscape.

Sometimes we bring in expert guests, but mostly it's just us having a real conversation about how super is working and what could make it even better.

Let's get into it.

Well, hello and welcome back to another episode of that Super Show.

I am joined by Neil, as always.

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And Xavier o' Halloran from Super Consumers Australia.

Now, Xavier, you guys have been in the press just today and yesterday around customer service.

It's not all good news, unfortunately, and maybe a lot of people wouldn't be surprised given what's been happening over the last few years around customer service in Super.

But what we is we wanted to build a fact base around what the customer service was like, particularly on call centers, and that's one of the areas that don't have as good an understanding about at the moment.

So it was relevant right now, given customer service really is in the spotlight in the superannuation sector.

Government talking about a mandatory customer service standard.

People a little bit in the dark as well, about what good customer service looks like, whether that fund offers it, where they could go, if that's something that's really important to them when they're picking a fund.

And so we partnered with an organization called CSBA who does this kind of stuff and has been doing it for decades.

And they work with industries and they actually work with a lot of superannuation funds to improve and uplift their standards.

And so we made a thousand calls out to 20 of the major superannuation funds and tested them on a range of different things, like how good they were at dealing with prospective customers.

So people coming in the door wanted to ask a few questions about the fund, like what investment options they have, their fees, performance, like that kind of stuff.

Then we asked also we had a vulnerable consumer scenario where someone was calling up, they're in a vulnerable situation, they might have had a loved one pass away, wanted to make an insurance claim, that kind of thing.

And we're just looking for some basic questions asked around what to do next.

And then that final scenario we had in there was for someone who, a member who didn't speak English and had a family member or someone close to them calling on their behalf to try and get some information for them.

And yeah, across the board, across all those three scenarios, it's pretty similar outcome.

It was a fail grade.

The average across all three was 49 out of 100 across the entire sector.

So, yeah, not good.

And then one of the other really standout findings, I guess, is two of the superannuation funds involved didn't pick up the call enough times to actually be tested.

So when you say didn't pick up the call, do you mean you just waited on hold for 45 minutes and gave up or it cut out or what happened?

We gave them 15 minutes to pick up the call and like 86% of the time they could do that across all the funds.

But yeah, Australian super and Team super could not.

And Australian super, particularly bad, only picked up the phone 10% of the time over the 10 weeks that we tested them.

Fifteen minutes, that's longer than my lunch break.

I'm not going to wait on hold that long just to get through the superannuation fund.

Why does it matter, Xavier?

If I look at what prospective members are looking for out of a superannuation fund, it's great performance, low fees, and the spread between those should be as wide as possible.

Customer service comes a.

Well, never even gets mentioned, to be honest.

I was going to say it comes a distant third.

It's not even on the menu.

Most people, lots of people don't even contact their super fund much, maybe once every couple of years.

Why do customer service standards matter, do you think, in this sector?

Yeah, so I think that's really accurate description, firstly of how important, I guess a lot of people see it without having to actually experience it.

I think that's when it switches, is when you have to experience it and then you're like, oh God, why am I waiting online forever?

Or the kinds of scenarios where customer service becomes really important.

So, for example, you talked about in your last show, people going through death benefit claim and the issues the superannuation sector have had with that and some of those cases that ASIC has taken, reports they've Put out where people waiting two years in some of the worst case scenarios for claims to be paid.

That obviously has a real impact, a financial impact ultimately, because people can't get the money out that is owed to them in a timely way.

And that translates through to people not being able to pay for their bills and put food on the table and really practical things like that.

So customer service, although it's not high up the list for a lot of people and it's probably pretty infrequent, particularly people during their working life that they would need to contact a superannuation fund.

But yeah, it becomes vital when you do actually need to make those calls and when you are relying on a good customer service experience.

I always say with phone calls you have to understand that nobody rings their super fund unless they have tried every other method of communication to get hold of you because no one wants to wait on hold.

It's like calling Telstra.

You only do it if you're desperate.

Yeah, that's exactly right.

Yeah.

So that just means by the time people are on the phone wanting something, the level of service is that much more important.

Right.

Because they really need your help at that point.

Yeah.

And we found in the 23% of the time people just got sent back to the website, which would be so frustrating because like you say, people don't.

It's not their first call, they've usually checked the website, can't find the answer.

And so sending them back to the website is, yeah, a really poor outcome.

They just spent 15 minutes trying to find the phone number on the website.

They don't want to get redirected.

So compared to other sectors which you might consider, consider world class in terms of customer service.

I'd be interested to know what CSBA recommended super funds should do as a first step.

What are the kind of top two or three failings that could be quick wins for a superannuation fund to turn around that contact center experience.

Yeah.

So this is where it gets really interesting and we were trying to be quite practical in terms of helping people solve these issues.

So when we briefed all the superannuation funds on the finding, we brought along someone from Sydney Water.

And CSBA had been working with Sydney Water because they've gone through this transformation themselves.

They were down at the levels that the super funds are at at the moment, barely passing, and brought their scores right up into the 80% range.

So they had some pretty practical things that they could do.

Like one of the examples they gave and it was interesting to hear the funds Reflect on this, because some of them had identified this as an issue for them as well, but they hadn't actually resolved it yet.

But one of them was that often they have metrics on their call centers to basically resolve a call in a certain time frame.

That obviously leads to them churning through calls quite quickly and maybe that improves their kind of ability to pick up the phone quicker.

But in terms of the success and sentiment outcomes and people's experience of actually getting questions answered, really poor and leads to terrible outcomes.

So, like you kind of missing the forest for the trees.

I think when you take some of these approaches and I think they were quite comfortable in saying, yeah, our call answer rates went up by like a minute or so.

They're still pretty good.

Like, they're not like.

Like what Australian super was doing.

They were talking about three minutes or something to pick up a call, but their satisfaction rates went through the roof off the back of that.

So there are practical things like that.

You can take these kind of dumb metrics out of testing for customer service staff and really uplift other things too, like providing training and incentives within those workplaces.

Like, I worked in a call center when I was at uni and it's a pretty grim place to work.

So basic things around making a nice place to work, rewarding those that go above and beyond.

And.

And they really do that in their call centers over at Sydney Water.

And so there was lots there to learn for the super funds.

There's a great story around the longest ever customer service call to a contact center.

It was Zappos, the shoe company who's since been acquired by Amazon.

They got legendary customer service and they lifted all the measurements about how long a call should last.

There used to be a lot of pressure to wrap up a call in three minutes.

So they removed all those targets.

And one contact center representative spent over 10 hours on the phone to a customer.

They had meals together, they got introduced to different members of the family.

It's quite a legendary call.

I'm not sure every superannuation needs to spend this.

I certainly think putting people under pressure to wrap up calls quickly when the consumer's in a moment of need or a moment of crisis even doesn't do anybody any good.

Yeah, I was on not a call but a chat with Telstra yesterday.

So I've just moved house and I've spent the last week arguing with Telstra.

Oh, my God.

Anyway, someone was clearly on the I need to get this wrapped up thing and they were trying to sell us Starlink, which is the one for when you live out in the outer whoop whoop.

I do not, however, live in outer whoop whoop.

I live in inner Sydney.

They were really pressuring me.

They said, so can we go ahead?

And I said, no, I need to talk to my husband, because I was trying to put them off.

And then they came back and said, well, can you call him right now?

I'm like, no, I cannot.

And I said to them, why can't I get NBN if there's an NBN box already attached to the house?

And they were giving me this whole spiel about how anyone could get an NBN box and just stick it there.

And it didn't mean that I could get nbn.

And anyway, it turns out, of course I can get nbn.

But it was really interesting to be in, to be on the receiving end, because it's been a long time of that high pressure sales tactics.

Clearly they had requirements to get you off the call in a set number of time.

They were using clearly scripted bits of content that they were copying and pasting from somewhere else.

That didn't always make sense.

The tense was wrong and that sort of stuff.

This thing of when you're trying really hard, and I'm sure they've been.

This is Telstra, who also gets slammed for terrible customer service.

I'm sure they have done all kinds of things to try and improve their customer service and giving them snippets that they can copy in is probably one of those things.

But it's interesting what it actually delivered in.

In the real.

The real world.

Yeah, yeah, absolutely.

I think there's something in there as well, around.

And this is one of the other areas we focused on around that vulnerable consumer scenario that we wanted to test around the empathy and understanding what kind of consistently came through on that one is the funds were so focused on kind of trying to validate if this person was a member or not, they just completely forget that someone had just disclosed, like a family member had just died or they'd had a disability, things like that.

And, you know, one of the examples was someone just said their mother had passed away and they needed money to go to a funeral.

And the very next question, not, you know, sorry for your loss, which would be the human response, was, yep, how do you spell your surname?

So, you know, it's just taking a second, I think, to understand there's a person in front of you and just talk to them like a human.

And.

And that's all they needed to do in that scenario to score well as well just had to act like a human.

So not very high.

That was the one that they scored worse on.

Do you think it made much of a difference whether the fund had an in house contact center that they ran themselves, whether they had outsourced that component of their business, whether the contact center was offshore or Australian based?

Did you have any sense of how that might have impacted your findings?

Yeah.

So we tested whether they were outsourced or not.

And so I think there were eight in the sample that were in source and the other 12 were outsourced.

Yeah.

Right.

Good mix.

We found a very minor difference in favor of the in source model.

It was only like couple of percent overall on their headline figures.

When we dug into some of the actual behaviors that were demonstrated we did find that yeah that edge got a little bit bigger on some things in terms of successful resolution or in the problem or the question that the person had that called they're about 4% higher.

So it wasn't a guarantee of a better outcome.

But it did seem to give a bit of an edge to some of those service centers if they were in house.

Yeah.

And this was all large super funds or were there any little ones in the mix?

I guess team's not enormous.

Yeah, we had a mix.

So we didn't just go for the 20 biggest on this one.

We tried to get a bit of a mix across the board of yeah, some smaller ones like team in there as well.

And was there any difference between big and small in terms of outcome?

It wasn't major from memory.

Team and Australian super were two of the ones that didn't pick up the phone calls often enough as an example.

Yeah, there was.

I need to check the part of the report to figure it out but I think there was.

It wasn't a guarantee again from memory and there was some slight differences.

We had heard from some of the smaller providers that they do take a bit more hands on approach which is really a good outcome and a point of difference.

I think that they've tried to sell themselves on too.

Yeah, definitely.

That's certainly been my experience of working with the smaller funds is they tend to have try very hard to have that more.

Someone will pick up straight away.

You might even know who they are.

Sort of approach service standards.

Xavier, the government's been rattling its sword around introducing service standards at least when it comes to topics like death benefit claims handling.

Do you think setting service standards or mandating service standards and regulating against those is the answer here or can we leave it up to market Forces that consumers will drift towards funds that provide better service.

Where do you think we go from here?

Yeah, I think we need them for a few reasons.

So I mean the government were pretty deliberate in the way they approached this.

I think it was a good 18 months or two years before they announced they were going to introduce them where they basically warned the industry, they said look, you need to improve outcomes here.

We're getting these consistent reports from the regulators coming through in Africa, complaints data that things are not all good and self improvement never came.

That's why the government moved to recommend or proposing that they'll introduce customer service standards probably 18 months or so ago now.

So we've been supportive of that in terms of why, like why the super funds didn't improve over that time.

Yeah, why, what do you reckon?

I think it's similar to what we were talking about before.

Like the incentive to be better is just not there because consumers are not contacting enough and they don't have transparency when they're picking a fund of what a good performing fund looks like.

And again that's partly why we want to do this research because we would put it out into the public and that could help them decide as well and help to drive a bit of market decision making to lift gains.

And given the amount of attention that was on that study as well, would really hope that some of the superannuation funds go okay.

We want to actually have an internal metric that is to perform at this level when super consumers next do this study because the market on its own probably wasn't doing the job here.

We hope by doing work like this we can actually drive it in the right direction because yeah, without service standards and without us putting scrutiny on things, I just don't think they get there.

At least that was the experience over the years leading up to the government mandating them.

Yeah, I'll be interested to see what, what format those service standards take.

I hope it's not call lengths and those kinds of things which kind of ironically drive a poor outcome for the consumer.

Let's see what they look like now.

Hopefully it's similar to the type of methodology that you used in conjunction with CSBA to measure.

Yeah, absolutely.

And it is actually a methodology that is used in regulating in other markets.

So I think it's Essential Services in Victoria also use CSBA to help regulate for certain outcomes amongst essential service providers in that state.

And so that's been a bit of a driver of performance improvements as well.

So yeah, I think integrating these types of smarter measures into Outcomes for consumers and driving the market that way and incentivizing it is, you know, a good approach to doing this when markets aren't kind of doing it on their own.

Sarah, I'm trying to recall, you know, all these award gala evenings where everybody gets an award for something.

I name them on the show, maybe.

Gen Y. I know everyone does them.

We love an awards night.

The best investment, the best retirement product, the best, you know, whatever.

I can't recall any of them that are for the best service, can you?

No.

Why do we not have awards for outstanding member services?

Well, I think partially it's what you've just said, Xavier, is that we don't have.

We haven't had a way of measuring it, not a public measurement of it, because it's got to be measured to do those things, or I'm a judge, quite a few of those awards for various different ones.

People put in submissions and you read the submissions and it's whoever's done the best submission.

But for something like customer service, you'd expect that that could be more numerically based, you know, member satisfaction or those sort of things.

Yeah, absolutely it is.

Interestingly though, all those sort of awards within the industry, I don't think there's many consumers that are involved in deciding who gets any of those awards.

No.

Do you guys do some sort of awards?

No, not at the moment.

There has been a floating.

Are you guys going to put on the big party?

I feel like it's a crowded space at the moment.

I just bought a new dress.

Come on.

Although in future, future years, if, like, there is some genuinely good performance coming out of these surveys as we do them, like.

Absolutely.

But yeah, it would be a bit hard off the first survey to give an award given everyone, the top score is 55%.

But maybe in future years.

I did a piece of research, not to the same extent as yours, but as a two years ago.

What happens when the contact center is closed?

Can I get any kind of service either through a chatbot or through the phone?

What happens when I call my contact center on a Sunday and it was woeful and your research is focused on the contact center when it's open?

Do you think better online experiences, chatbots, voice bots and things will have a big place to play in member experiences in the future?

Or do we just need to spend a lot of time and effort getting the basics right before we worry about modern technology?

I think what always comes up in these studies is that consumers want different things and they want different channels and you know, might be fine for a Gen Z to go.

You know, I'm completely comfortable talking to an AI chatbot and that's all good.

I can navigate it, I know how to ask it the right questions.

I think it really comes down to the consumer as to what channel they're going to prefer.

It's pretty normal, I think, for Gen Z to be fine with a chatbot and they can kind of get what they want out of it.

But yeah, for someone who's older or heading towards retirement, wanting to talk to a person is a really big thing.

And so I think that's always going to play an important part.

But yeah, I think that that diversity and focusing on what the consumer actually wants rather than shoving whatever the most efficient option is down people's throats is the way that superannuation funds should be thinking about this.

Otherwise you'll just create more accessibility barriers.

Particularly with.

We did a piece of work last year as an example looking at first nations access to superannuation.

Obviously larger parts of that population are living in remoter parts of the country.

Internet connections aren't a kind of sound stable thing that you can rely on.

And so it may just be the Telstra phone line that exists in your community, that is your lifeline out to contact service providers like superannuation funds.

And so yeah, they need to keep these options open because they are, we're all required to contribute to this game.

It's got to work for all Australians.

And yeah, service, customer service lines are going to be an important part of that for a lot of people.

Some of the other research that you've published recently, there's been a variety of topics.

The CSLR has come up, the compensation scheme of last resort and who should be funding that.

Can we dive into that a little bit more because I'm curious to hear your thoughts on who should fund it, even if it should exist at all.

You've said that consumers shouldn't be made to pay for the failures of some of the bad actors, but be curious to hear who you think should pay for it.

Yeah, absolutely.

So yeah, we're big supporters of the compensation scheme of last resort.

It was something that the consumer sector really pushed for for a number of years to protect when the absolute worst happens.

I think everyone's been surprised by the frequency at which and the amount in recent years of these types of failures.

And it's a pretty clear sign that as custodians of the system, government superannuation funds, even advocates like me, calling out where the gaps are have dropped the ball on this one.

There was a huge failure that saw 11,000 people lose their retirement savings in Share Shield and First Guardian.

So that's not good enough.

There needs to be protections in place when that kind of thing happens.

The CSLR is already capped at 150k, so there are controls in place already that really limit what individuals can claim.

And we've always found that kind of spreading the load of that cap as wide as possible is probably the best way to do it.

You still want incentives in the system to make sure that that particular industries that are responsible are incentivized to improve.

But the CSLR is a levy on, not necessarily those that have done wrong.

It's on the broader sector.

I think sharing that load wide makes sense.

One observation I've made though, as it's been in place and particularly as we've engaged in policy reforms to make the system safer on the back of Shield and First Guardian is it's really sharpened the attention of of all industry stakeholders as to what are the most effective solutions to stop this from happening again.

Like I've worked in this consumer protection space for over a decade and that is not always the case.

Sometimes it's what is the minimum bar we can do?

What is the disclosure mechanism that we can put in place so that we can keep kind of doing what we're doing and say that we've got a consumer protection there.

That's not been the case, I'd say this time around.

And I think it's because they're on the hook financially.

Like if this kind of thing keeps happening, a whole bunch of industries that really don't want to be paying for this have to pay.

So I think yeah, that's a kind of good and maybe intended outcome of a CSLR that is spread across the broader financial services sector.

One thing that's caught my attention is the increase in funding or the levy that's required and put on financial advisors.

And it can be thousands of dollars every year just to open the doors of your financial advice business.

And then there's a per advisor fee as well.

So that's getting really expensive and obviously those costs are getting passed to consumers.

There's no other way to fund that.

So financial advice is becoming more and more expensive as a result and therefore out of reach of a large part of middle Australia who really needs it as they head into retirement.

I'm wondering if there's ways that we could spread the load a little bit wider.

For example, the big cohort that isn't captured is SMSF trustees.

They seem to be making a lot of claims against the CSLR and yet they're never asked to contribute to the levy unless they go and pay for financial advice, in which case part of the advice fee covers the levy.

Do you think that SMSFs should be included as well?

Yeah, absolutely.

That is a gap in the system.

I mean they're paying for it via their advice if they've received it.

I guess an equivalence there, there would be people in APRA regulated funds that aren't taking out advice that are potentially paying under some of the special levies that are getting levied at the moment as well.

So I think again our first principle for us is spreading that load wide.

So it doesn't, doesn't unfairly kind of hurt any individual industry.

There were some modeling though in the treasury papers on kind of potential impacts of special levies on advice fees.

And you know, in the context of an advice fee where average fees are kind of $5,000 thereabouts, the types of fees that these levies that they were proposing with the levy caps that they were proposing as well, not that significant, would make up a fairly tiny portion.

So I get there's lots of costs and it's not just the cslr, there's like regulator levies as well that falling on financial advisors too which all add up.

But when you think about the cost, the proportionate costs on the consumers have lost their life savings, a few extra one hundred or thousand dollars here or there on the part of industry versus someone being completely thrown into poverty in retirement.

It seems like a fair enough trade off.

But yeah, like I said it is about spreading that as wide as possible.

So no one sector or no one individual is carrying all the load.

Yeah, I agree.

I think that's the bit we're missing at the moment.

Financial advisors are bearing most of it where it wouldn't even be a rounding error for most super funds and on the one end and on the other end the people most likely to claim are SMSFs so they should definitely be contributing.

Yeah, I don't even buy like obviously the super sector pushed back quite hard against having to fund the CSLR and saying this isn't a problem we created so why are we responsible for it?

I really dispute that like a lot of the people that got sucked out of funds and put into shield and first guardian came from industry funds, didn't do anything to protect them on the way out.

Like they could have been better at engaging with them over their lifetime in that fund and to the extent that those individuals might be paying for the CSLR while they are in an upper regulated fund, if they do get sucked out in the future into some dodgy investment that needs to be protected under a scheme like this or through poor financial advice or whatever it is like they would have paid because they were in the upper regulated fund at the time.

So I just don't buy it.

I think you want protections to be broad based and as soon as you create gaps, you create harm for consumers because they don't always understand as well where these gaps are when they're switching.

They're not going to understand.

I switched into this product, suddenly I lose all these protections.

That's just something that even if it's disclosed to them often and the kind of impact of it doesn't really crystallize until you do actually lose your money.

Yeah, that's right.

I agree.

I think it's really interesting what you're saying.

I hadn't really thought about that.

Around big super funds not doing anything to stop people leaving.

And there's, I mean, kind of following on from that.

There probably is something to think about and look at with, and this is part of the treasury paper as well, with the risk that's being taken on when people are wholly invested in a single investment option and how facilitative of that.

Some of the platforms in particular have been not having appropriate protections in place to ensure that kind of thing doesn't happen.

And likewise on the SMSF side, like it's just this area that government has failed to properly regulate.

Now we get all this tax incentivized cash to put into these savings, but the government just says do what you like with it.

If you're in a SMSF like you seem quite right.

Yeah.

We have a sophisticated investor test that you need need to pass before you can make certain types of investments in wholesale funds and other things.

Do you think we need to have a similar standard before you become an SMSF trustee?

Yeah, absolutely.

And that's another area.

We've proposed some reforms in other jurisdictions.

I think certain states in Canada for similar schemes you do have to do a bit of a test and a bit of a training course before you can run those types of things.

It's not a perfect solution, but it will at least provide an opportunity for some people to better understand what they're getting into before setting up something that does actually put a huge number of obligations on you as the trustee.

So I don't think it would hurt to have some of that, I think kind of Joined to that, what we often find is that there's a whole bunch of financial abuse and other things going on with some of these structures as well.

And if there's opportunities to pause on establishment and for different trustees to understand their rights and even for the ATO to actually do proper checking at that point to ensure that, that all trustees understand their obligations and know what they're getting into and can kind of, you know, if they're not, if they're in a kind of situation of financial abuse, for example, that that could be flagged and that the ATO could have more powers to do something about that if they do find evidence of misconduct or abuse in the establishment of SMSFs.

That's so interesting.

There's a whole, the term arbitrage is one that I think needs to be bandied around a bit more actually in these issues because.

Because what becomes, what happens is bad actors can basically arbitrage between funds, between different styles of retirement savings to do the wrong thing.

Because we have different rules for different parts of the system.

Yeah, absolutely.

And I think the chance of that is much higher with the way we're kind of regulating at the moment.

Cause all the emphasis has been on platform regulation, but not really anything on SMSFs in terms of the treasury and government approach to date.

Now I think the government's aware of that and aware that that could lead to a real arbitrage situation and bad actors instead pursuing SMSFs as a solution.

So they're alive to it.

But yeah, we really encourage them to start coming up with some real solutions to stop that arbitrage from happening.

And the number of SMSFs that have been opened recently, it's really started to uptick again.

I was head of SMSF at Macquarie back in the day, 13, 14 years ago and the numbers were high then, but they, since they dropped right off, but the last five years have really started to come back, back.

Maybe that's just people who wanted to stay with our industry fund, but they couldn't get through to anybody on the phone when they called.

Potentially.

But there is something, I think there is something interesting going on with the SMSF business model.

Like there are obviously new players in the market who are, yes, there are offering very low cost models that are designed to attract people to set up SMSFs.

And so I think there does need to be a bit of attention paid to what's going on there.

How much do consumers understand?

Obviously lots of debates over whether the people that are going into them have sufficient balance sizes and understanding of what their obligations Are, I think, yeah, there's a potential for the next big disaster there if government and regulators don't get on top of this one.

Yeah, I think highly likely.

If I was a betting woman, that's where I'd be putting my money for the next debacle, without a doubt.

I think there's a groundswell I see in the online forums of people moving into SMSFs because they want to leverage their investments.

They see leveraged ETFs available, but they're very restricted.

A couple of retail funds support them, but you have to go to a wrap platform and SMSF to invest in those.

Most super funds don't offer them and these are people seeking out super high risk investments.

They're very concentrated in one or two industries or sectors or one or two investments.

And if we have an economic downturn then these people are going to get caught out big time.

And I wonder if those are going to be making future claims against the CSLR because they were badly advised or they, they felt that they weren't protected enough by the platform and they got caught out because they're taking wholly inappropriate risk that it could have been protected from if they just stayed within the big app regulated sector.

Yeah, I think that's right.

There's a huge amount of risk there.

We've been looking at some of the SMSF numbers, trying to understand what our place might be in improving that part of the system and the whole whack of people out there who have invested almost entirely in cryptocurrency, almost entirely in cash, like the kind of investment governance that's going on, there's clearly, there's plenty of estimates that are doing fine as well, I should say, and that seems very competent.

But the kind of level of protection around people making big mistakes is not really there.

And that has flow on costs, not just as cslr, but ultimately, I guess to things like the age pension as well as if people do put all their money into a single high risk investment, that doesn't work out.

So yeah, there's cost to everyone that need to be addressed in that.

Well, talking about age pension, the fact that we're now entering a decumulation phase, the system's entering a decumulation phase where more and more Australians are retiring.

What do you see as the warning bells for that in terms of product, in terms of education, in terms of support for retiring Australians?

Do you think the sector is well placed or is there still lots of room for improvement there?

Yeah, room for improvement.

Again, we've approached this one from A bit of a different perspective.

I think the industry's kind of thought about, oh, how can we do advice and guidance, how could we do product design?

We went to consumers and tried to figure out how they wanted to go about planning for retirement.

And that was, that's been really fundamental piece of research for us because we found broadly across a whole battery of questions that we asked about how engaged they were, what they knew, who they trusted, those types of things.

We found that broadly, people fell into three groups.

So there was a group that was about a quarter of the pre retiree population who really wanted experts to help them with it.

They're engaged and they cared, but they wanted someone's help through it all, which makes total sense.

And so for that cohort, financial advice is like a really good solution.

So you need a good high quality financial advice provided to them.

They did.

That group also skewed.

Typically they were a bit higher wealth and more likely to own their home as well.

So in a bit of better position perhaps to afford financial advice too, which is good given some of the affordability issues around.

Advice then in the middle was about, I think it was 37%.

We found again another really engaged group of people.

But they wanted to manage money themselves.

They didn't trust anyone else.

Like, they were like, this is my money, I'm going to manage it.

I'll do all the research myself and figure it out.

They were far more likely to use a whole range of different information sources.

So they kind of cobbled together what they could find on Money Smart, their super fund website, any other kind of financial press, and make decisions for themselves.

So for that cohort, we thought they were pretty poorly served actually, because a lot of the guidance is pretty poor out there.

And I think Money Smart, although it's been improving recently, just been chronically underinvested in and it lags behind what they offer for a similar service in the UK and in New Zealand, even pretty far behind.

Like, we don't have good integrated comparison tools.

In the same way, the UK version even offers a little bit of, of over the phone guidance with financial advice equivalent.

Yeah.

Which I think, as our research keeps finding, that's kind of what older people, and particularly people are thinking about making big decisions, want a bit of comfort from a human being that this is going to work out all right.

So, yeah, that group we found were really underserved.

So better comparison tools, more investment in Money Smart were the solutions that we thought were going to be most effective for that group.

Group.

And then the final group, the biggest group, around 38% of that pre retirement population, completely disengaged from, didn't want to be making any decisions at all.

Spent zero time thinking about or planning for retirement.

Now, during working lives, doesn't matter too much.

Like the system is designed to look after that group of people.

Right.

Everyone has their SG contributions, there's a performance test making sure that the default options are, are producing basically good outcomes in terms of returns and so they're well catered for.

But when it gets to retirement, all that disappears.

We've got no defaults, we've got no performance testing.

Nothing really happens unless they take an active step.

And as the research found, they're probably not going to.

They're just not engaged with this at all.

So for that cohort, yeah, it's thinking about what default design looks like in retirement and there's a whole range of options there and we don't have solutions to that yet.

But I think that's where there have been some good ideas like different people have talked about.

Perhaps at a certain age there should be a requirement to start drawing down at a specific rate.

I like that one.

Yeah.

I think there's a lot of merit to that one.

If we really want to keep the superannuation system focused on retirement income and not estate planning, I think there's a lot of merit to requiring people to actually use the money while they're alive.

Yeah.

And ideas like that and performance testing, of course, like we don't have that in the retirement phase.

And when we did some research last year to unpack that, we found amongst some of the worst and best performing retirement options within a similar kind of risk profile.

Yeah, right.

There's something like a $200,000 difference in outcome for a typical retiree retiring with a typical balance across their retirement by staying invested in a poor option versus a good option, that, that's a huge impact on someone's ability to live a good retirement, I would say.

But yeah, there's a current treasury inquiry on extension, but I don't hold huge hopes that we'll get there because there is so much pushback from different stakeholders in the industry who are like, we can't test these products, they've got totally different goals to accumulation products.

That was the other thing we looked at in the research.

Like most of the products are identical, there's no differences.

So there's big questions over whether that's actually true or not.

Um, but even if there are different products and we know like there are different products in terms of annuity based products that kind of deal with risk and investment in different ways.

But all three people are in.

Those will be fine.

So.

Exactly.

Yeah, let's test where everyone's at at the moment.

Seem like a pretty logical conclusion to us.

And then let's start to develop more bespoke things if that's where the market moves to.

Yeah.

Sarah and I've discussed previously some research that Sarah dug up up on this mandatory switching from an accumulation account into a pension account.

So even if you don't make a conscious decision then you reach a certain age.

I think Sarah was 75 was one of the numbers that stuck in my head around an appropriate age.

I think younger than that might even be suitable so that you're not paying more tax than you have to.

And Xavier, I like your idea of performance testing some of those retirement products because I think we need to make sure that there is a default arrangement there, there that is risk appropriate and obviously the risk profile and risk appetite should change as you get older.

And so the typical MySuper product where it's.

Well, most of them are pretty growth oriented these days, probably isn't suitable for somebody who's 65, 70 years old.

Yeah, yeah, I think that's right.

And I mean it depends on your balance size as well.

Of course if you've got a high balance, maybe that high risk is fine.

But yeah, I think that there needs to be a bit more tailoring and thought that we've seen little green, green shoots on this.

Like we've seen some funds kind of think about having a modified drawdown rate built into their kind of pretty basic vanilla products for retirees, not just using the kind of government minimums.

So Australian super has a product like that.

I think that's really interesting.

That's like worth funds really exploring a bit more and kind of providing those types of soft defaults or subtle nudges to people that the government minimum drawdown rates aren't designed to be right for you.

You should actually think about it and if the actuaries can come up with a number that will actually work for a lot of people a lot better, then by all means do that.

I think Aware does that too where they basically.

Yeah, it sort of nudges you to do a higher drawdown and it gives you different options and sort of percentage likelihood that your money will last as long as you do.

Yeah, their tool on that is amazing and they took us through it.

It's really innovative, it's really clever and.

Then it pushes people to take Higher, Higher drawdown than they otherwise would without messing up their quality of life.

So, yeah, I think some of that stuff, and this is the funny thing that always cracks me up, the idea of, let's say we did have a thing where at 75 you had to move it into an allocated pension, or at 85, whatever's left you had to take out or something like that.

People freak out.

And the first thing is that the government is stealing their money, but actually no one is taking their money away from them.

They are just making them take it out of the super system.

Yeah, exactly.

You can do.

You can put it in a bank account, you can invest it in crypto, can do whatever the hell you like with it.

Yeah, I think that's right.

I mean, the intent there is to encourage you to use it and not just leave it in a tax incentivized environment, which at the end of the day is a cost for all of us as taxpayers.

That's right.

Pretty big tax cuts to people in that cohort.

And there's probably a few equity issues.

I think particularly for younger cohorts.

They're kind of looking at their economic situation, their ability to buy houses, and they're saying this doesn't quite square up.

Yeah, exactly, exactly.

I'd never even heard the word equity until my daughter went to a inner city school with lots of indigenous kids and lots of really low socioeconomic kids.

And then I learn about the difference between equity and equality.

So I'm still pretty new to that idea.

But yeah, when you suddenly understand that it's a whole different.

Whole different ball game.

Yeah, absolutely.

No, it is, I think, an important thing to think about in system design like this because it is a mandatory system and you want to make sure that it's delivering good outcomes for everyone.

Seifer, you mentioned a comparison there of Money Smart to similar programs in.

I think you said New Zealand and the uk Taking the Australian superannuation system and comparing that to other countries retirement systems.

Where do you think we are doing well?

And are there other lessons from other countries we should be emulating?

Yeah, so I think obviously the accumulation design, and this is, I guess, a matter for history, but because we set it up so much earlier than anyone else and had a compulsory system, we're kind of straight to head of the rest of the world in terms of individual savings and what that means for a whole range of benefits for government, but partly for individuals too.

So we're probably streets ahead in that.

It took us a while, I guess, to get into things like Performance testing those products and making sure that they were basically good ones.

And it's been a real stepped process from I guess we started out with a very disclosure based consumer protection system through to one that more tests for outcomes now which I think is the right, right direction of travel if you actually want to protect consumers.

So yeah, that accumulation side I think we're pretty far ahead but it's in the decumulation where I think the wheels fall off compared to the rest of the world and it's down to the kind of same design choices.

I guess other systems have kept to a more pension based system and paid out incomes rather than letting individuals manage huge balances and trying to figure out what to do with it.

So yeah, we're way too hands on I think at the individual level in retirement than other countries would ever do.

I think there's a bit of a joke around the UK moving to a bit more of an Australian system in retirement and all the kind of chaos that that caused there and, and that's actually where their, their Money Smart equivalent Genesis came from is my understanding that you know they started giving all this individual decision making choices over to people they weren't really equipped with any tools or help to do it.

So they, the way they designed it is actually got instead of here like I guess every single super fund has got its own bespoke guidance or intra fund advice service and pretty varying levels I would say in terms of the quality of those like that example of Aware and what they're doing seems pretty fantastic.

But then we're seeing others that when we looked at retirement income calculators across all the funds a couple of years ago, some of them were just like they didn't have one at all.

They were just redirecting to Money Smart which I guess is fine.

Like it's probably better than developing something that's bad or some just use like pretty outdated concepts that are really grounding consumer decision making around things like the ask for comfortable standard which is one number.

It's not going to work for everyone.

It's a bit of a fundamental flaw there in terms of its efficacy for everyone.

So anyway they the, the UK government set up an independent body use an industry levy so so I guess instead of the funds all doing it themselves, they collectively contributed to this which means it's much better funded than Money Smart.

We would do some of that.

That seems such a pointless thing for everyone to be building the same thing themselves.

Yeah, that's what it felt like when we went through and the tools they all looked kind of samey some, like I said, some didn't even have them and none of them were that good.

Like there was no real.

Because it's costly too to develop this on your own and they're kind of the same thing.

So it's so inefficient building the same thing over and over again.

Like just seems like a no brainer to me that we'd be better served by some service like that.

So we do have the services.

Australia has the financial information service today and it's really centered around how to claim age pension and all the government benefits and health cards and concessions and things that go with that.

Do you think that service could be extended through some kind of funding?

Funding from super Funds to provide maybe not financial advice but some guidance for those folks entering into retirement who maybe can't afford personal holistic financial advice?

Yeah, I think so.

We've heard in the past that service has had its issues but we've heard it's been improving massively and actually does cover a lot of what people need when planning for retirement.

Particularly because most people will have age pension as a part of their retirement income.

But what we also found through that research is government does all these things but they're all isolated and all over the place.

And whenever we survey consumers and we have a list of all the different retirement resources, just remember there was this qualitative, we had a feedback field where someone could put a comment in and they just said I wish I had known that this many of them existed when I planned for retirement.

I just feel like I missed out.

So I think integrating a lot of these services is pretty dumb at the moment.

We've got a comparison tool sitting over at the ATO Got Money smart covering a whole bunch of things.

We've got Services Australia doing a bit of the puzzle as well.

Then we've got a bit of aged care advice mattered around the place too, which is really important for figuring out what your retirement income needs will be.

Yeah, it's not good enough.

Government needs to get their act together and bring all these services together.

And that's besides all the influencers and authors.

Yeah, nice.

Endless list.

And of course a lot of the those are great resources.

I think I've noticed an uptick in the number of licensed financial advisors who've got educational channels on YouTube now.

Whereas before it was kind of the wild west of anybody who'd managed to cobble a few cents together could start a YouTube channel and teach other people about money.

That has, I think it's still a bit like that, but there's some good financial advisors stepping into that arena now as well.

But yeah, it's all over the place.

Yeah, absolutely.

Yeah.

I wouldn't say this is research I've done, but just a vibe check I do occasionally checking on all the influencers to see what the quality of advice and guidance is.

And last time I checked, to be honest, it wasn't terrible.

Like they were focusing on basic things and they were getting it mostly right.

I think the other thing to watch out for with some of the more licensed advice providers though, it did all seem to be a bit lead generation adjacent, or actually lead generation which, you know, as we know, has just led to a whole bunch of problems.

Lead generation adjacent.

That.

That's very polite.

Yeah.

I perhaps don't have as much of an issue with you as people putting out good educational content in order to boost the profile of their firm.

That seems to me to be much better than paying some telemarketing agency to go and scam people into an smsf.

Yeah, absolutely.

If that's what it is.

I think just so long as everyone's kind of on the hook and there's ways to test that, they are actually probably providing good guidance there, I think that that's okay.

But yeah, obviously the more the issue with that model is that, yeah, they're, they're outsourcing that obligation to someone else and you don't necessarily know what they're doing.

And those lead generators may not be in the hook in the same way that a actual trained professional financial advisor would be.

I think treasury has indicated that that lead generation piece is not going to last much longer, not without some kind of license or regulation.

So.

Yep, good.

Fine with me.

Yeah, done.

Move on.

What's next?

DBF 4, challenge 2, please.

Yeah.

Oh, God.

I think DB, DBFO tranche 2 is dead in the water.

The question is, I think I've said this joke before, is it cryogenically frozen and it's going to come back or has it been chopped up by the mafia and it's never coming back?

I don't know.

I think it is coming back, to be honest.

I think.

Oh, do you?

You're going cryogenics, not the mafia.

Yeah, yeah.

Because I think, like, rightly, government's just seen, you know, this explosion with SHIELD and First Guardian that it needs to tidy up first before it gets into anything else.

And I think you can paint me as a bit of a skeptic on what some of the outcomes will be from that package as well.

Like looking at some of the specifics, I think come back to what I said earlier and what consumers want from.

From retirement planning.

And there seems to be bigger opportunities for higher value gains in things like getting the defaults right, performance testing and making sure there's good independent information out there, rather than kind of just ceding that ground to superannuation funds and saying, you know, you get better at nudging or you get better at providing, you know, lower trained financial advisors to people.

And then there's some trickery around what they're kind of proposing to do around the best interest duty there as well.

It's kind of under the moniker of, I think, modernizing the best interest duty.

But a lot of harm could be done if they don't get that definition right and it doesn't actually protect people in the same way.

And to make that practical, I think one of the areas that they've looked at in the past is around.

What.

The obligations are, I guess, for a financial advisor to kind of understand what the full picture and needs are of the consumer and make it a bit easier for them to give a kind of scaled, confined piece of advice.

And I understand why they think that's valuable.

Like they want to be able to do it more efficiently, but there's a lot of harm that can flow from that as well if you don't get it right.

Because the opportunity, I guess, define someone's needs in a way that might align a little more with yours in terms of pushing a particular product is a lot higher if you don't have a good definition of the best interest duty.

So you need to be careful, I think, around what that means.

Yeah, I was still at Macquarie when all that stuff came out and.

Cause it was all part of fofa, I think.

But anyway, the whole safe harbour, because the problem is step seven or whatever it is, one of the steps in the safe harbour says, and anything else that might be relevant under any circumstances, basically to give this person good advice, advice.

And everyone just.

Everyone just freaked out because it basically said you had to.

You couldn't give any advice until you knew absolutely everything about the person.

So this idea of being able to somehow get that back to a point where it's.

But as you say, isn't such a thing that you can go, oh, well, the customer told me they only wanted advice about their life insurance.

So I sold them life insurance.

When it turned out, you know, they were 75 and that, you know, wasn't gonna work anyway or whatever.

Yeah, I Think that's right.

Like consumers don't know what, they don't know which.

Going to a financial advisor to give them the kind of independent advice about what's right for them.

So how to sort of, how to sort of balance that up.

I must admit I still do think there's.

It's gotta be better than it is now.

But I certainly take your point about it can't be.

Well, we can't be back to that whole arbitrage thing.

Right.

Where I can, I can kind of find the loopholes and the gaps in the legislation to then be able to just sell whatever I want to sell with bugger all regard for the wellbeing of the person that I'm flogging it to.

Yeah.

And as soon as you bake those kind of conflicts into the system, which I think to be honest, that's where the DBFO package takes you because it puts more of the onus on super funds to kind of fix that deficit in consumer understanding or action.

Like they've got an incentive that is, you know, not always aligned with the individual.

If they're not a good performing fund, for example, they don't have the retirement product product that that consumer might need because there's real variation at the moment across the funds, then what do they do?

They're going to tell you to go away.

Like probably not.

Like they're going to try and keep you and tell you.

But should they tell you to go away?

Yes, they should.

Yeah, yeah, absolutely.

But, but, but.

Well, speaking of conflicts of interest, I think we're out of time.

My calendar.

We really enjoyed having you on the show today.

Thank you very much much for a very wide ranging conversation and a range of views.

Let's hope that we can pick up customer care standards, death benefit claim standards, some of those might be mandated and legislated fairly soon, but lots of work for the superannuation sector to do.

So thanks for shining a light on all of that.

No, thanks for having me.

It was a great conversation.

Yeah, big thanks from me too.

We'll have to get you back on maybe in a year's time and see tick off all the things that have been fixed.

Hopefully we'll have one of those.

I think customer service standard maybe will get.

Yeah, yeah, I reckon, I reckon that you heard it here first team.

It's going to be fixed within the year.

Xavier says.

It's all going to be fixed.

Thanks for listening to that super show.

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