A data revolution is happening in the superannuation fund industry, with today’s super funds focused on adapting to new regulations while continuing to enhance the member experience.
Data governance is currently a hot topic among Australian superannuation funds, as regulation, pandemic-driven changes, mergers & acquisitions and improved information sources lead organisations to reassess their use of data.
Regulation has been high on the agenda for Australia’s super funds in recent years, and after a slower pace during the early stages of the Covid-19 pandemic, it has shifted back into gear. Super funds are working on the rollout of the Australian Prudential Regulation Authority (APRA)’s Superannuation Data Transformation (SDT) project over the next two years.
APRA’s SDT aims to drive better industry practices and improve member outcomes by significantly enhancing the comparability and consistency of reported data. The project will make it easier to scrutinise and reliably compare funds, especially in the choice segment of the market.
Consumers already have much better comparison tools at their fingertips as a result of this legislation. In August this year, APRA1 released its inaugural assessment of the best and worst performing super funds, with 13 funds listed as failing the performance test.
In addition to increasing customer transparency, APRA’s regulation is also expected to drive structural change in the industry, with the emerging view that any fund with less than AUD 30 billion in assets under management would increasingly be uncompetitive against the so-called ‘mega-funds’.
According to KPMG analysis2, more than three quarters (76%) of assets under management and member accounts (77%) will be managed by the top 12 funds, all with over AUD 50 billion under management, once recently announced mergers have been finalised.
This trend is creating challenges for smaller funds, many of whom will need to take a partnership approach to connecting with third parties to ensure they obtain and process the relevant and accurate data they need to continue to operate efficiently.
COVID-19 accelerated digital trend
Changing customer expectations are another factor driving the increased focus by super funds on data and digital assets.
Today’s consumers are used to shopping, banking and investing online and as a result are comparing their super fund’s digital presence with that of other services they use every day. This means super funds have had to invest significant resources in their digital capabilities in order to keep pace.
This trend was only accelerated by the onset of the COVID-19 pandemic. Our clients reported a spike in transactions, calls and website traffic, as member engagement increased, particularly during the period of the Early Release of Super Scheme. The lockdown period also led to funds putting more resources into their digital assets, from the optimisation of websites to offering robo-advice.
Better use of data
Both complying with requirements for greater transparency around data and increased digitisation mean Australia’s super funds are now awash with sources of data, with many grappling with how to best implement this transformation. This is especially complex when working with aging internal infrastructures with limitations to accessing data.
An important step is the creation of good data governance, for a number of reasons:
- Firstly, it ensures all the right partners are engaged, reducing internal silos, often a cause of limitations to quality data.
- It helps to develop trust and transparency, which is particularly important in an environment where funds are merging. It’s also critical to support audit and regulatory requirements.
- Finally, with the focus of regulators and super funds firmly on bringing efficiencies and cost savings for members, the right data can assist with this process.
Implementing a good data policy and governance model, however, is not something that can be solved by IT alone. We believe in the need to have the right governance framework, a well-designed data architecture but also the right SMEs data expertise to implement industrialised processes that work efficiently.
Another big challenge for asset owners and managers is the time and cost involved in engaging and working with an ever-expanding group of data providers and fintech companies. As a result, we are seeing more super funds turning to custodians to assist with their data management needs.
With global networks and established relationships with specialist firms, custodians can add value in a range of ways. They can help to connect super funds to the right sources of data, assist with data curation and aggregation and provide analytics and reporting tools to help funds to derive meaningful insights from their data.
For example, a key priority for asset owners today is ESG disclosure. Sustainable Finance Disclosure Regulation (SFDR) in Europe is now in place and is a significant step on the path towards sustainable transparency, requiring all financial market participants – not just ESG-focused firms – to disclose how they manage sustainability risks.
This is a significant exercise because of the sheer amount of raw data from companies’ Corporate Sustainability Reports (CSR) and engagement strategies that will need to be collected and analysed, as well as taking into account controversies.
A custodian should also be able to provide the highest standards in data security. As a European bank, BNP Paribas has ‘bank grade’ security protocols in place which meet the cybersecurity framework of the National Institute of Standards and Technology.
Our Data Custodian strategy is designed to assist clients through efficient data management services, relevant analytics and a combined open and internal enterprise architecture whilst ensuring the appropriate governance and protections are in place. Our value proposition lies in helping our clients overcome the ‘problem’ of managing data complexity so they can focus on actionable insights in a more accurate and timely manner.
In summary, the data age for super funds is without doubt upon us. Preparing for increased digitisation will mean more complexity for super funds and data sources will continue to multiply. We expect custodians will have a key role to play working together with Australia’s super funds to best manage and utilise their data.
1APRA, Your Future, Your Super Performance Test Results, August 2021
2KPMG Super Insights Report, 2021