IN THIS EDITION - December 2017
A word from Cath
Welcome to the first edition of IFS Update, a quarterly newsletter to keep you informed of key events, news and insights from IFS.
In this inaugural edition, I'd like to share with you a little about changes at IFS since I commenced as CEO over 18 months ago, and how our business is evolving to continue to meet the needs of our client funds.
Over recent years, IFS has increasingly focussed on financial advice as our core offer and the 2017-20 business plan directs resources to growth in this area. This includes a recognition of the growing importance of digital channels and a commitment to taking a leadership role in bringing the next generation of digital engagement and advice tools to not for profit super funds. This is a key priority of the IFS Advice Forum, established in August this year.
Cross fund matching and arrears collection also remain important services for us and for the industry super funds with whom we work.
We are also working to improve the efficiency of our business by reducing resource allocation to non-essential activities. Our decision to exit IRIS and to reduce the complexity of our non-super investment offering, demonstrate our focus on ensuring the structure and operations of IFS are aligned to delivering on our core purpose.
You'll find more about the work IFS has been doing in these areas throughout this newsletter.
I hope you enjoy the first edition of our IFS Update. To find out more about our services or any of the issues raised here, please get in touch. We'd love to hear from you.
IFS Chief Executive
Working together to reduce unpaid super
Recent media shone a spotlight on ATO estimates of underpayments of $17.1 billion in compulsory super entitlements to Australian workers from 2009 to 2015.
It's a timely reminder of the role fund trustees can play in collecting unpaid super.
IFS has recovered $822 million in the last 5 years, and more than $1.7 billion on behalf of members since our operation was established in October 1991. 90% of unpaid super is collected from employers with 10 or fewer fund members.
In our experience, the fund trustee is often the first to identify that a payment has been missed.
Most employers do not intend to fall behind, and generally the unpaid super can be collected without recourse to litigation. The earlier super funds act to recover unpaid super, the more likely the debt will be paid with a simple phone call.
That said, each year the IFS team issues over 600 statements of claim in court, recovering $8.6m last year. 98% of claims are uncontested.
We also represent the trustee in insolvency proceedings, and last year collected $30 million paid directly to Funds and $5 million paid to the ATO for work performed by IFS.
Speak to us to find out how we can work together to help your fund support your members.
Cross fund matching allows auto-consolidation of multiple accounts
Multiple account holding has also attracted significant attention in Canberra as policy makers have focussed on erosion of members' balances, particularly in inactive accounts.
In May 2016 IFS welcomed changes to regulations surrounding ERFs, which facilitate auto-consolidation of lost and inactive accounts.
These changes allow ERFs like AUSfund to transfer monies to a member's active account without prior notice or the member's consent so long as the receiving fund has received at least one contribution or rollover from that member within the last 12 months.
AUSfund recently conducted a trial of the effectiveness of the cross fund matching service in this current legislative environment and results indicate that around 20% of inflows can be matched back to participating funds.
Funds that send their lost and inactive accounts to AUSfund twice a year are eligible for this cross fund matching service at no cost to the fund.
The success of cross fund matching depends on the participation of funds to transfer the accounts of lost and inactive members to AUSfund in lieu of the ATO. Read the full report and results of our trial and contact Kate Brown, AUSfund Product Manager on 03 96574282 if you'd like to know more.
IFS Advice Forum – For a changing advice landscape
August 2017 saw the kick-off of the IFS Advice Forum. This forum was established to bring client funds together to share information and insights related to advice services, and to co-design solutions to ensure our offering continuously evolves to meet the needs of client funds and members of superannuation funds. The forum will help shape IFS Advice Solutions' strategic priorities.
In addition to key strategic issues and projects relevant to IFS' broader financial advice service offerings, a subcommittee of the forum has been created to develop the next generation of digital advice tools, tailored for the needs of not-for-profit superannuation funds.
IFS Board has identified this as a priority and we are now allocating resources to enable us to better serve our clients through new and emerging digital channels, seamlessly complementing advice through traditional channels.
Through the Forum, IFS is collaborating with client funds to co-design solutions, within a sustainable commercial model that ensures scale benefits for participants. We will identify the optimal technology partner to deliver online advice tools that are integrated with client fund Administrators and CRMs to allow members to move between online and traditional advice channels; and to establish a robust regime for monitoring and supervision of digital advice.
A recent report revealed that the total number of SOAs issued via digital advice has jumped by 128% over the past year, with total funds under advice doubling to $8.4 billion over the past 14 months. You can access the full report here.
Some of the issues and opportunities that the IFS Advice Forum are responding to include:
- The costs of traditional financial advice which make it either unaffordable or perceived as too expensive relative to value delivered. Digital advice can make final advice more affordable to more people
- More and more Australians are turning to digital channels to manage their lives. A digital advice solution is imperative for funds to remain relevant and to retain and engage their members
- With increased scrutiny, and trust in the financial advice industry waning, industry funds are well positioned to transform the traditional advice model and become a trusted adviser for more Australians through the digital channel.
Despite the obvious need for digital advice solutions, at IFS we see shortcomings with current market offerings. In particular, most replicate offline advice processes in an online environment resulting in complex and clunky interfaces, and poor integration. This limits member engagement and goals based (vs product-led) interactions.
The benefits to funds of complementing traditional advice with digital delivery is clear and the development of a more effective solution is imperative.
If you would like to find out more about the Advice Forum and consider becoming part of the team who shape the future direction of advice for industry super funds, please contact Chris Joiner, Executive Manager, Advice Solutions on (03) 9657 4305.
Do you have a question for IFS? Or a burning issue you'd like to see covered in the next edition of our newsletter?
We welcome your feedback too, so drop us a line, we'd love to hear from you.