CONSULTANTS: Editorials: Edition: June / August 2020

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Individualisation
to the fore

Clear trends emerge in employee benefits.
Impacts of Covid-19 still to come through.

Since 1981, presentation of the Sanlam Benchmark research has been an annual highlight on the calendar of the retirement-fund industry. Partly a networking jamboree and partly a brand promotion, it’s primarily an event never to be missed for the solid research that analyses trends and stimulates thought for the benefit of the industry as a whole.

This year is different, thanks (if ever the word is wrongly used) to Covid-19. First, research for Benchmark 2020 was concluded prior to the crisis so couldn’t cover it. Second, depending on when recipients of the report are released from detention,

Sanlam presenters are likely to be seen only on small screens. Third, the catering extravaganzas in Cape Town and Johannesburg will be replaced by virtual eating. It’s a sign of the times that Sanlam corporate distribution executive Viresh Maharaj has now extended questionnaires to employee-benefit consultants for them to share experiences and expectations as the crisis took hold. Because the impact is so profound, it is more necessary than ever that they participate. Insights will be released in July. Meanwhile, Benchmark 2020 will obviously be available for website download.

Valuable as always, the latest pre-Covid findings from responses by a representative sample of 106 professional employee-benefits consultants must be at least as relevant during and after Covid. What emerges most strongly, the survey reports, is that “the focus of institutional retirement funding will shift towards engaging members themselves”.

In the traditional consulting framework, boards of fund trustees were primarily the recipients of consultants’ services. Now the switch into member engagement is marked. It represents the opportunity to individualise the member’s experience of retirement funding “enabling better decisions informed by data and engagement”.

It’s thought that the increased consolidation of standalone funds into umbrella arrangements has influenced this shift to individualisation. Employers expect consultants to be involved at the various layers of their employees. It’s a consequence of the reduced complexity, relative to stand alones, for employees to understand their participation in umbrellas.

Moreover, according to the survey, last year’s implementation of the ‘default regulations’ would have played a key role in informing this shift. This is because, in the nature of paid-up members, retirement-benefits counselling and trustee-endorsed annuity strategies all lend themselves to a greater focus on individualisation.

Asked to identify key megatrends anticipated by consultants over the next five years, top is technological innovation. Next comes member focus with moves towards provision of integrated product suites and flexibility of benefits.

All speak to unlocking value for members by enabling greater individualisation. Amongst the lowest-ranked items was investment-related issues. The survey also found that “a significant proportion” of employers and funds still point their members to engage with their own advisors. If so, it represents a missed opportunity to enable financial inclusion for the majority of affected members who do not have their own advisors. This is equivalent to not having a strategy in place.

Alongside advice, there was “significant support” for members to be trained in financial literacy. More than 75% of respondents believe that it adds value to members. Individual fund members should be empowered by “relevant education”.

When it comes to group insurance, a number of concerns are identified. Amongst them:

Policyholder protection rules (PPRs) have made moderate to no impact on advice processes;

In advising clients on the selection of service providers, price ranks first. However, while it is necessary for consultants to ensure that pricing remains competitive and relevant, marginal differences in price “do not meaningfully improve retirement outcomes”. Ranking poorly, relative to other criteria, are financial strength and service levels;

• Insufficient attention is paid to material risks in cybersecurity;

Little interest in enabling transformation.

• The survey states the obvious but let it be repeated for emphasis: “The convergence of changes in regulation, member behaviour patterns, technological innovation and industry consolidation means that the need for high-quality advice has never been greater.”