Iress and Griffith University reveal the double-edged sword of choice in super

Since the introduction of smartphones, we've become conditioned to expect immediacy, accessibility and simplicity in every aspect of our lives - including our finances. We want our bank accounts available whenever we need them and we expect the performance of our investments to be accurate to the millisecond. As an industry, we've facilitated these changes in super as well - members can now access their account balance and switch investment options with the press of a button.

All of this is designed to give people 24/7 control over their retirement savings - a positive step in returning agency to each individual member in the superannuation system. But as new research undertaken by Iress and Griffith University reveals, choice and immediacy in super is something of a double-edged sword - especially during a crisis like COVID-19.

The wrong end of the switch

The research analysed over 42,000 superannuation switch decisions from 1 January 2019 to 31 March 2021 during the COVID pandemic and identified a near-tripling of members switching their investment options.

Alarmingly, there was a 50% increase in poor superannuation switching decisions as the pandemic progressed, with 'bad' switches defined as having a negative impact on superannuation balances compared to doing nothing. Interrogating this data, we sought to better-understand the relationship between financial literacy and decision-making by superannuation members.

The ease with which members are able to switch through online channels, combined with heightened consumer awareness of fluctuations in financial markets and substantive media coverage through the pandemic, led to an increase in both switching activity and negative outcomes for members. Older members and women, who typically have lower superannuation balances, were among the most dramatically affected by 'bad' switching decisions over this period.

What we found wasn't surprising but it is stark - if not provided with adequate support and information, people often make poor decisions during market downturns and this can have long-lasting impacts on their financial wellbeing and retirement savings.

To address this, the research makes three recommendations:

1. Trustees have an obligation to better support member financial decision making through systematically increasing their financial literacy and capability
2. Consideration should be given to the use of technology to positively 'intervene' in decision making of members potentially at risk
3. Access to quality financial advice should be dramatically improved to ensure that help is available to those who need it.

Prevention is better than cure

Iress already provides some superannuation funds with smart tools that can intervene at the moment a member is considering taking action to ensure they understand the long-term impacts of their financial decisions, as well as providing avenues to accessing financial advice at scale with our interactive robo advice.

However, we also believe that prevention is better than cure. This is why it's crucial that super funds deliver ongoing strategic information to help guide members through financial decision-making. At Iress, we've been supporting superannuation funds with highly engaging and targeted financial education content.

Iress Education seeks to build financial capability and change the way members think about their super through the power of storytelling.

Our engaging articles, videos, and action steps are designed to get your members ready to take charge of their super through better knowledge, understanding and capability. We take the emotive, wrap it in facts and deliver clear actionable "next steps".

Our super education library, which is updated every month with a minimum of 4 written articles and videos, allows you to choose the content that matches your members demographics, interests and knowledge levels. Automatic feeds can pull this content to your website, member portal or email communications.

The clear demand for member education is demonstrated in Investment Trends' 2020 Member Sentiment Report which found that 80% of members felt their education needs were unmet.

The results from Iress Education since its launch in August 2021 prove that members want content that is based around life moments and is offered through bite sized pieces of content to engage. There is always an outcome with an instructional layer for next steps - this increases accountability with tangible to-do steps and we measure financial literacy outcomes with easy one-question surveys. We have achieved:

• 20% uplift for each month on month for content views
• Overall open-rate 30% above industry benchmark (18%)
• Video is driving great engagement with 50%+ video average watch time and only increasing,
• 80% of responses on the optional financial capability quiz were either a 4/5 or 5/5 in knowledge improvement, attitude change or behavioural change..

Our super education library also includes reporting data so you can easily demonstrate how you have supported your members' best financial interests.

It's imperative that superannuation trustees and policymakers consider strategies to support members making more effective decisions about their superannuation, and Iress can help. Talk to your relationship manager about technology solutions and robo advice.

To get a copy of the research or to have a demonstration of our education offering, please call your relationship manager or contact Suzi Watral at [email protected]

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