Superannuation start-ups in the $2.3 trillion sector could be a key future trend with millennials emerging as the next battleground in member acquisition.
According to Investment Trends technology analyst, Ian Webster, the industry has traditionally had eyes only for the retiree segment of the market.
“Millennials and the younger demographics have now been rediscovered as an important market in member acquisition,” Webster told AB+F.
The table below reveals the dominant players in superannuation including industry funds, self-managed superannuation funds and the bank-backed retail funds. Start-ups could soon be competing for some of the super pie.
The shift in attention towards millennials is driven in part by a maturing sector.
Webster said superannuation was perceived as being a trade-off to higher wages, a theme which underpinned the industrial system of the 1980s and early 1990s. After nearly 24 years of compulsory superannuation, the younger generations no longer has that mindset and instead superannuation is now seen as another savings vehicle.
A unique proposition
“The relationships between wages and superannuation has loosened. There is now an opportunity to re-engage with a new segment and an ability to acquire this generation as new members,” he said.
Consistent with this trend has been the emergence of a number of start-ups in the sector that are targeting the younger demographic. According to Webster, these businesses each offer a unique proposition to the millennial market.
“Who would have thought that there would be start-ups in superannuation, particularly as many perceive it to be a rather boring sector?” he said.
Such businesses include Spaceship and Zuper. Spaceship drives appeal to the millennials via its focus on technology investments. Both these businesses have a big focus on digital applications.
According to Webster, the superannuation sector still has work to do in terms of implementing digital and mobile technology. Only ten superannuation funds offer apps.
The aspirational consumer
Zuper chief executive and co-founder, Jess Ellerm (pictured), believes that technology will drive choice in superannuation.
Ellerm had her start in the industry at Tyro Payments and saw a gap in the superannuation market for an offering that gave people control over their superannuation, backed by technology. The superannuation business includes a team of people from backgrounds in investments, behavioural science and technology.
The fund invests in a mix of investments exposed to the health and wellness sector as well as technology and green sectors.
While the offering may resonate with millennials, Ellerm said the target market is not focused on age, rather Zuper would appeal to the ‘aspirational consumer’.
The relationships between wages and superannuation has loosened. There is now an opportunity to re-engage with a new segment and an ability to acquire this generation as new members
“These consumers are value-based and relate to brands that are consistent with their beliefs. Financial brands now need to empower consumers to achieve their goals,” she said.
Consistent with Webster’s views, she said younger people now perceive superannuation as a wealth product and are happy to take greater control if they are provided with the education and technology.
In terms of the incumbent players, Webster identified Australian Ethical as making inroads into the millennial market by successfully focusing on ethical investments.
“This fund was the first-mover to actively target millennials by providing them with the choice to invest in 100 per cent ethical investments. The plan was backed by a social media strategy. They have done very well.”
He further identified the Commonwealth Bank’s Essential Super as another successful fund in the millennial market.
“Supported by digital features, it’s fast growing with predominately younger members who also have existing accounts with the bank.”
However, Webster said performance and fees will remain a key priority for all superannuation members.